Tax Considerations for Pediatric Dentists

As the end of the year approaches, we have a lot of things on our minds. The winter break rush, juggling team schedules during the holidays, and of course our own personal plans for the season. With all of this going on, it’s easy to overlook one of the most important aspects of your business – tax planning. We all know the old saying that there are only two things that are certain in life: death and taxes. While that may be true, there are strategies that we can employ to help mitigate our tax burden. Disclaimer: this is just one guy’s advice and you should consult with your accountant before acting on any of these tips.

Pay all Expenses Before End of Year

Make sure that you pay all of your supplier bills, service invoices, etc. before the end of the year. This can save you thousands alone.

Contribute to Your Retirement Plan

Consider offering a 401k to your entire office with a safe harbor plan. That way you can max out your contribution to your 401k and not get penalized if the rest of your team decides not to do the same.

Staff Training

Hosting an annual team training at the end of the year has benefits that extend far beyond tax purposes, but it doesn’t hurt that most expenses relating to team training can be deducted.

Invest in Your Office

How fresh is your paint? What does your carpet look like? Does your floor still have that stain from when you dropped the brand new bottle of Midazolam? (yes, it’s happened to us). Freshening up your office can increase new patient flow, improve the patient experience, and has the added benefit of being tax-deductible.

Invest in Your Practice

You should never buy a new piece of dental equipment solely for tax purposes – the math won’t ever add up. But if you’ve been on the fence for a long time and have really wanted to get that shiny new Lightscalpel laser for a while, there are specific tax deductions for large purchases that can be hugely beneficial to you.

Have the Right Business Structure

There are significant tax ramifications based on what kind of legal entity you chose for your dental practice. Knowing which entity to choose varies with each dentist’s individual situation. Switching from a LLC to an S-Corp can have a major impact on your taxes, your liability, and the value of your practice. Spend the money to get expert advice from both a legal standpoint as well as an accounting standpoint as to how you want to structure your entity moving forward. It’s typically easy to change it once, but difficult to change it again, so getting it right is crucial. Which leads me to my final point.

Accountants are Not Created Equal

Employing a CPA with no experience in the dental industry is akin to hiring a math tutor to teach your child English literature. They may get the basics right, but they will miss so much of the nuance that can have a huge impact on your long term financial planning.

In Summary

As pediatric dental professionals we are fortunate to be in a position that we have to worry about a large tax bill. Employing strategies to help alleviate your tax liability is a responsibility you have to your business and to yourself. Most people wait until “tax season”, ie February and March, to speak with their CPA about taxes. By then it is far too late, not to mention the fact that most accountants are in full blown scramble mode at that point, so how much attention are they going to be able to give your finances? My recommendation to you is to get on a call with your CPA or tax attorney this week to start planning for the end of the year. Most of these strategies are contingent upon occurring before January 1st, so get moving!