2024 Tax Secrets Every Dentist Needs to Know

• December 05 2024, by SurgiMac LLC
• 14 min reading time

For most business owners, tax season is daunting, but if done properly with strategic decision-making and careful planning, it can be an unlocking moment to generate massive savings for your dental practice's financial health. With 2024 coming to a close, it is now time to unlock tax savings and get your dental practice set up for a prosperous new year. By bringing together strategic planning, smart equipment purchases, and often overlooked deductions, you can reduce taxable income while growing your business.

This is a step-by-step guide that outlines actionable steps that can be taken in making the most of opportunities before the end of the year.

1. Maximize Deductions

Did you know you can write off up to $1,220,000 of qualifying equipment under Section 179? Dental professionals can use this deduction for business assets such as surgical instruments, PPE, or new office technology purchased and operational by December 31.

The tax code offers several deductions specifically for dental practices. Here are some key areas to focus on:

• Section 179 Deduction: For 2024, the Section 179 limit has been raised, thereby enabling you to claim the total cost of qualified equipment including dental chairs, X-ray machines, and even particular software as a deduction. This is an excellent investment opportunity in your practice which reduces tax burdens at the same time.
• Bonus Depreciation: Bonus depreciation can be claimed to fully or partially expense a huge chunk of the cost of newly purchased and used equipment. Therefore, if you can take bonus depreciation in addition to the Section 179 deduction, you could, potentially, fully expense the purchases of your equipment.
• Pass-Through Income Deduction: If your practice is a pass-through entity in the form of an S corporation or a partnership, you may be eligible to claim the qualified business income deduction, which allows you to potentially deduct 20% of your qualified business income after further reducing your taxable income.

Expand with Confidence and Maximize Deductions

If you’ve recently renovated or moved your practice, there are extra opportunities to save:

• Write Off Abandoned Leasehold Improvements: Did you abandon any custom features, like walls or fixtures? The unused portion may be deductible.
• Cost Segregation Studies: Analysis and reclassifications of property elements may enable quicker depreciation and savings.
• Accessibility Improvements: Enhancements such as wheelchair ramps or adaptive equipment may qualify for credits under IRS Sections 44 and 190.

2. Uncover Overlooked Deductions

Many dentists overlook valuable tax deductions that can lead to substantial savings. Here are a few often-missed opportunities:

• Home Office Deduction: This means you may qualify for the home office deduction if you have dedicated space within your home to running the business-whether bookkeeping or administration. It gives you a chance to reduce some home-related expenses such as interest on the mortgage, property taxes, utilities, and depreciation on the property.

• Charitable Contributions: Charitable donations to qualified organizations can be deducted from your taxable income. Consider "bunching" your charitable contributions in a single year to maximize your deductions.

• Continuing Education: Investments in continuing education courses and conferences to enhance professional development are tax-deductible.

3. Optimize Equipment Investments

Investing in new dental equipment can significantly enhance your practice's efficiency, patient experience, and profitability. However, it's crucial to plan these investments strategically to maximize tax benefits.

• Timing is Key: Timing your equipment purchases to maximize the Section 179 deduction and bonus depreciation may also be a good idea. Making such purchases before the year-end deadline will reduce your current tax liability.
• SurgiMac's Instrument Solutions: SurgiMac offers a wide range of high-quality dental & medical instruments. These tools can not only improve your practice's workflow but also potentially qualify for significant tax deductions.

4. Plan for Retirement

Retirement planning is essential for securing your financial future. Take advantage of tax-advantaged retirement savings plans to reduce your taxable income and build a comfortable nest egg.

• 401(k) Plans: Maximize your contributions to your 401(k) plan, including both employee and employer contributions. Consider utilizing the profit-sharing option to further boost your retirement savings.
• IRA Contributions: Supplement your 401(k) savings with contributions to a traditional or Roth IRA.
• Hiring Family Members: Supplement your 401(k) savings with contributions to a traditional or Roth IRA.
  Hiring Family Members. If your spouse or children are working in your practice, consider hiring them and setting up retirement accounts for them. Such an act will provide important tax benefits and help create wealth together with your family.

5. Navigate Practice Transitions

Whether you are expanding your practice, preparing to sell, or working with a dental service organization (DSO), understanding the tax implications of these transitions is key.

• Practice Expansion: If you're expanding your practice, be aware of leasehold improvements and benefits of cost segregation studies.
• Selling Your Practice: You must sell your practice. To do so, you have to understand all the tax implications, like asset allocation and capital gains taxes, which you have to consult a tax professional for.
• Working with DSOs: If you are involved in a DSO, pay the management fees in a manner that reduces your taxable income.

Don’t Overlook These Easy Wins

Small steps add up when it comes to tax savings. Here are a few commonly overlooked deductions:

• Dental School Tools: If you are using loupes, textbooks, or instruments from when you were a student in your current practice, they might qualify as a deduction.
• Home Office Deduction: Deduct up to $5 per square foot (max 300 square feet) for administrative work done at home.
• Mileage: Travel from your home office to your practice is deductible, boosting your automobile-related savings.

Why SurgiMac

With SurgiMac, you invest in top-quality instruments and PPE but also position your practice for financial success. Our line of reliable, precision-made products ensures your patients are getting the best care possible while also allowing you to take advantage of year-end tax deductions.

Final Words

By proactively planning and taking advantage of the tax strategies outlined in this guide, you can optimize your 2024 tax savings and position your dental practice for long-term success. Remember to consult with a qualified tax professional to ensure you are maximizing your deductions and minimizing your tax liability.

FAQ's

What kind of dental expenses are tax deductible?

Many cost and expenses that a dental practice needs to incur for operating its business can be written off, such as:

• Equipment Purchases: Items like intraoral scanners, 3D printers, or CBCT machines qualify for deductions under Section 179 or depreciation.
• Leasehold Improvements: Expenses related to upgrading or improving your office space, like building new walls or accessibility upgrades.
• Office Supplies and Materials: Consumables such as gloves, masks, sutures, and other essential supplies.
• Professional Fees: Accounting, legal, and consulting fees are deductible as business expenses.
• Staff Costs: Salaries, training expenses, and employee benefits can also be deducted.

For dental expenses for personal use such as routine cleanings or dental implants, these should be deductible under medical expense if they exceed the threshold set by the IRS that is 7.5% of your adjusted gross income.

What are write-offs in dentistry?

Write-offs in dentistry are expenses deducted from the taxable income of your practice, reducing your overall tax liability. Examples include:

• Bad Debt Write-Offs: If a patient fails to pay for services and the debt is considered uncollectible, it can be written off.
• Inventory and Supplies: Expenses for items used during patient care, such as dental tools, floss, or anesthetics.
• Continuing Education: Costs for seminars, courses, or certifications required to maintain your license or improve your skills.
• Marketing and Advertising: Expenses for promoting your practice, including website design, social media ads, and print materials.

Are dental premiums tax deductible?

Premiums for dental insurance for your employees are deductible as part of employee benefits. If you are self-employed, you can also deduct premiums for yourself, your spouse, and dependents under certain conditions, provided you are not eligible for other employer-sponsored insurance.

Can you claim dental implants on your taxes?

Yes, dental implants are considered a qualified medical expense, which can be deducted with other medical and dental expenses. However, it is deductible only if the total amount of medical and dental expenses exceeds 7.5% of your adjusted gross income and not covered by an insurance plan.

What proof do I need to deduct medical expenses?

To claim medical expenses, you must maintain proper documentation, such as:

• Receipts and invoices showing the amount paid.
• Detailed statements from healthcare providers or facilities.
• Proof of payment, such as bank or credit card statements.
• Insurance reimbursement records, if applicable.

Is it worth claiming medical expenses on taxes?

It is worthwhile to claim medical expenses if the total exceeds 7.5% of your adjusted gross income. For dentists, this threshold may be easier to exceed if significant out-of-pocket expenses, such as dental implants or orthodontics, are incurred during the year.

What cannot be claimed as a medical expense?

Certain expenses are not considered deductible, including:

• Cosmetic procedures like teeth whitening or veneers (if not medically necessary).
• Over-the-counter products like non-prescription toothpaste or mouthwash.
• Gym memberships, even if recommended by a dentist or physician.
• General wellness services such as massages, unless prescribed for a medical condition.

What does the IRS allow for medical deductions?

The IRS allows deductions for expenses incurred to prevent, diagnose, or treat a medical or dental condition. This includes:

• Dental treatments like fillings, extractions, braces, and implants.
• Preventive care, such as routine cleanings and checkups.
• Prescription medications and medical supplies used for treatment.
• Travel expenses for medical care, including mileage or lodging, under certain conditions.

What tax credits can I claim without receipts?

While most deductions require receipts, some credits may not, such as:

• Standard Deduction: You can take this instead of itemizing, and it doesn’t require receipts.
• Qualified Business Income (QBI) Deduction: Available to dental practice owners, this deduction doesn’t necessitate receipts but requires proper bookkeeping and financial records.

Useful Resources

• IRS Website: The official website of the Internal Revenue Service provides a wealth of information on tax laws, publications, and forms.
• American Dental Association (ADA): The ADA website provides resources and information on various aspects of dental practice management, including financial and tax matters.
• Year-End Tax Planning Tips for Dental Practice Owners: This blog post by The Dental CFO offers valuable insights into year-end tax planning, including equipment purchases, depreciation, and retirement contributions.
• Tax Saving Strategies for Dentists: This blog post by Samera explores various tax-saving strategies for dentists, including capital allowances, dividend allowance, and pension contributions.
• SurgiMac Equipment Catalog: Find Your Favorite SurgiMac Products Here

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Cost Effective Solutions SurgiMac Tax Deductions Tax Season

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