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.
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:
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.
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.
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.
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:
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:
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!