There are several tax deductions that are particularly applicable for dental practices. By taking advantage of all relevant deductions, a dental practice can save money by reducing the amount of taxable income. The laws surrounding tax deduction limits and qualified items changes, regularly. It is, therefore, essential to make sure you are operating under the most current and up-to-date IRS specifications. If questions arise or any confusion presents surrounding deductions it is best to consult a tax professional to assure you are obtaining the maximum benefits pertinent to dental practice tax deductions. As such, there are many money-saving strategies that should be taken into consideration with regard to dental practices and effective tax planning methods.
Tax reform laws have implemented several new tax legislation that relate directly to dentists and dental practices. For example, under the new laws, dentists are now eligible to deduct up to twenty percent of qualified business income that passes through their company (assuming the company is structured as an S corporation, a sole proprietorship or a partnership). Hence, any dentist that has a pass-through entity will only be taxed on 80% of their pass-through income. There is an earning cap to this deduction, and a phase-out will ensue once that cap is reached. Therefore, the caveat of this deduction is that as income increases, the benefit will decrease.
The Internal Revenue Service Code Section 179 enables small business owners to deduct the purchase or lease price of software and/ or equipment. The cutoff for taking advantage of Section 179 is the calendar year, and any software and/ or equipment must not only have been leased or purchased, but also implemented and/ or installed during the same calendar year (i.e. January 1, 2019 through December 31, 2019). The monetary limits for expensing items in 2019 were $1,000,000.00. Any organization that spent over $2,500,000.00 during the calendar year on qualifying items are ineligible for this tax benefit, as it is meant to incentivize small businesses. The spending limits have been raised for 2020 to $1,040,000.00 for qualified expenses. In order to obtain the most from Section 179, it is best to address the needs of your dental practice with a financial professional early in the calendar year, so as to purchase and implement any qualifying items while meeting the time requirements to benefit, within the calendar.
Tax Deductible Expenses
Certain profession-related expenses can be entitled to count as additional tax deductions. Examples of tax-deductible expenses in relation to dental associates and dental practices can include the following:
- Dental equipment
- Dental supplies
- Licensing fees
- Subscription dues
- Cost for continuing dental education
- Cellular telephone
- Cost of software
- Business car use (with restrictions)
There are important considerations one must factor into preparing his or her tax return, one of which being to provide the most accurate information. Tax deductions were developed to help even the playing field. Many deductions provide professionals with the opportunity to have access to the items they need to properly function and/ or provide/ perform needed services without being penalized for incurring the entire cost for the additional needed items.
For Further Information
If you follow your instincts and are clear with your needs you will likely find an accountant that is an excellent fit. While the task to connect with the right accountant may seem overwhelming, please keep in mind it will be worth it in the long run. The financial guidance that a good accountant will provide during one’s lifetime can result in significant financial gain. With the full range of accounting services Allman & Allman APAC provide, we are certainly equipped with the expertise for which you may be in need. Seeking guidance from our firm will proved you the opportunity to work with individuals armed with broad and deep financial knowledge, able to provide advice on a wide range of issues. As a full-service public accounting firm, our professional services will surely help you succeed and thrive. Please feel free to reach out to Allman & Allman APAC via email at Genna@apapd.com or via phone at 760-406-5056 to discuss your situation and find out how we can help you grow. We look forward to hearing from you.
“Little Known Tax Deduction for Dentists and Orthodontists.” LBMC Family of Companies, 24 Jan. 2020, www.lbmc.com/blog/little-known-tax-deduction-for-dentists-and-orthodontists/.
“Section 179 Deduction: A Simple Guide: Bench Accounting.” Bench, www.bench.co/blog/tax-tips/section-179-deduction/.
“Section 179 Information for Businesses.” Section179.Org, www.section179.org/.
“The Impact of Tax Reform on the Dental Industry.” Baker Tilly, www.bakertilly.com/insights/the-impact-of-tax-reform-on-the-dental-industry.