Did you know? – Dentists who pay more than 30% in federal, state, and self-employment taxes combined may be overpaying their fair share. A dental tax consultant can help you save your tax. Wondering how? Here are our best tax saving tips for dentists compiled for you. So, read on to learn how you can save tax as a dentist.

There have been significant changes to both high-income individuals and small businesses with the new tax law. Since you are a dentist who probably falls into both of these categories, be sure to familiarize yourself with the major changes as soon as possible.

Over the years, helping dentists save tax, we at Sigma have realized that about 95% of all our clients were paying way more in taxes than what they owed. The reason? Poor tax planning for dentists by CPAs who don’t specialize in dental practice accounting. Many CPAs fail to take advantage of all of the opportunities offered by the U.S. tax code because they simply aren’t aware of them. Here’s how you can get the benefits for your business.

1. Expense Your Equipment

Deductions under section 179 help you reduce your taxable income by accelerating how you expense new equipment. Buying new or used equipment can immediately be expensed up to $1,000,000. Having said that, if you purchased equipment worth more than $3.5 million, there are limitations. Call one of our expert dental accountants at Sigma to understand how you can use these expenses to save taxes.

Bonus depreciation can accelerate the expense process for new or used equipment. As an alternative to writing off 100% of the equipment’s value, you can depreciate the balance over the Modified Accelerated Cost Recovery System (MACRS) life.

2. Perform A Cost Segregation Study

Did you build, buy, or renovate your office building in the last 6 to 12 months? If yes, consider performing a cost segregation study.

How do cost segregation studies work? It allows you to use bonus depreciation to reclassify and expense some construction and renovation costs immediately using shorter depreciation classes.

A CSS can be complicated to undertake if you aren’t an expert at accounting. Fortunately, we have a qualified and certified team of Dental CPAs at Sigma who can help you perform the study.

3. Are You Appropriately Preparing For Your Retirement?

Are you deferring your wages into a 401(k) to prepare for your retirement? If yes, you can contribute and defer about $19000 if you are under the age of 50 and about $25000 if you are over the age of 50.

If you don’t have a plan for your retirement yet, you’re making a grave mistake! Talk to an expert today and get a customized program that may include contributions to an Individual Retirement Account (IRA). You can contribute about $6000 annually towards an IRA to save up on the 3.8% investment tax.

Additional Things To Consider –

  • Consider Roth deferrals or pre-tax deferrals.
  • Utilize the SIMPLE IRA plan for employees
  • Check out a 401(k) with safe harbor
  • Establish a defined benefit plan that is cash balance based

Jigna, our principal, is a retirement planning expert who has helped multiple dentists plan for a stable future. Join them on their quest for growth and stability by booking a call with us.

4. Use Your Family To Your Businesses’ Advantage

If you have children, you probably give them pocket money for expenses. Use this to your advantage by employing your children and participating in the IRS-approved strategy to reduce your payroll taxes.  This is a Win-Win as you get the tax saving while your children get money for their expenses or even college.

Unemployment taxes are not due until children turn 21. Additionally, they are not liable for payroll taxes, Social Security, Medicare, or unemployment taxes until they turn 18. They also will not be subject to the FICA and Medicare taxes on their wages. LLC owners can benefit from family tax breaks, just like sole proprietors.

Bonus Tip – Your Child’s College Education In The Future Can Save You Money In The Present.

If you plan on sending your child to college (Which you most likely will and should), you can set up a 529 Plan.

What’s a 529 plan? A 529 plan is a tax saving instrument where the contributions are tax-free, as long as the distributions are used for qualified educational expenses like college. Some states also offer additional tax benefits for a 529 plan.

You’re probably still fairly confused with all of this. Do you want help? Allow us to unburden you from taking care of your financial health. We at Sigma always strive to ensure that businesses that work with us are healthy and growing by providing the best dental accounting and dental bookkeeping services for them. Feel free to book a meeting with us, no obligations and no strings attached. The coffee’s on us.