5 Easy Tax Planning Strategies Dental Practices Use To Save Money At Tax Time

When you open a dental practice, tax planning is likely the last thing on your mind. Even so, when you own a dental practice, you are not just a dentist. You’re a business owner, entrepreneur, and a million other things all at the same time. 

Accurate dental bookkeeping and dental practice accounting is crucial for successful practices. Preparing for tax season is about more than just having your paperwork in order. It is also about knowing how to make decisions throughout the year that reduce your tax obligations and increase your tax return so that your dental practice has more revenue and working capital. 

As a dental professional, here are a few things you can do this year to plan ahead for next year’s tax season. 

 1. Deduct Equipment & Technology Purchases

Investing in upgraded equipment and technology can lower your taxable income when you deduct qualifying purchases using Section 179.

This section of the tax law allows businesses to deduct the full price of equipment, technology and other qualifying purchases. Whether you financed the purchase of dental equipment or bought it outright, you can still deduct the full price. This applies to new and used dental equipment. You can even choose to apply full depreciation for the purchase in the first year or absorb it over five years.

The list of approved dental technology and equipment purchases is extensive, but here are a few examples of tax-deductible purchases you can file under Section 179: 

• Dentist chairs, x-ray machines, laser dental tools, and similar equipment
• Computers, servers, and dental bookkeeping and accounting software
• Ventilation and HVAC systems for the practice
• Dentist office security systems

We don’t have to tell you that dental equipment and technology can be a hefty financial lift, especially if you’re opening your first dental practice. 

Dentists who know about and apply tax deductions like those in Section 179 can lighten their tax burden significantly.

2. Maximize Your Retirement & Health Savings Plans

The more you can contribute to your 401(k), the more of your income avoids taxation. As a dental practice business owner, you can contribute up to $22,500 in 2023. If you are over 50, you can contribute an additional $7,500. 

If you qualify, you can also contribute pre-taxed dollars into a health savings account (HSA). Increasing your contributions to your HSA – or looking into getting an HSA as part of your dental practice’s health insurance coverage – is a great idea for reducing your tax bill. 

Your tax advisor can help you make the most of these contributions as they relate to your tax planning.

 3. Increase Charitable Giving

Deducting your charitable contributions at the end of the year doesn’t just help with tax deductions—it also helps you build a positive name for yourself in the community! 

Your dental practice can sponsor community events, make donations to local schools, make gifts of property or equipment, or even deduct your travel expenses when you are helping a non-profit organization.

 4. Remodel, Renovate, or Improve Your space

Do you need to make improvements to your real estate, including renovations, remodeling, or major repairs? Tax planning for dentists may include improving your offices, exam rooms, waiting rooms, and more. 

There are two main ways to benefit from making improvements to your physical property: 

1. Most improvements and renovations are tax-deductible as an expense but may require capitalizing the improvements and then depreciating the improvements over time.
2. You may be eligible for a tax credit if you are housed in a historic property or a building that was constructed before 1936.

 5. Work With A Knowledgeable CPA

One of the best ways to make sure that your dental tax planning will pay off is to work with a qualified and experienced CPA. Specifically, you want a CPA who has expertise in tax strategies for dentists!

Your CPA can do the following and more: 

• Balance your financial records
• Audit accounts
• Manage budgets
• Provide financial guidance
• Create and publish financial reports
• Support you in your financial decisions
• Handle complex tax situations
• File tax returns

Schedule Your Free consultation With Chaliff + Associates 

At Chaliff + Associates, we crunch the numbers so you don’t have to. That means you can focus on growing your dental practice instead of worrying about taxes, bookkeeping, and accounting! 

Set up a time to meet with one of our representatives for a free consultation!