From strategically investing in new technology and equipment to remodeling your office or expanding to another location, every decision you make can affect the taxes you owe each year. Saving money for retirement and reducing tax burdens are among dental practice owners’ most frequently mentioned goals.
If you own a dental practice, working with an attorney to create a yearly tax plan can help minimize your upcoming tax liability. At Mahan Law, our dental attorneys understand how important it is for dental practices to minimize their tax liability. We work with dental practices nationwide to create effective tax planning strategies.
Selecting the Most Strategic Corporate Structure
The type of legal business structure you form will significantly affect your tax liability. Many dental practice owners choose to form an S corporation, which can reward dental practices with a lower tax burden by avoiding double taxation. You can also deduct losses from an S corporation against your personal income. Additionally, an attorney can work with you to shield a percentage of your business income from being considered taxable income by splitting it among family members via gifts, stock sales, and other strategies.
Reducing Your Tax Burden By Making Charitable Contributions
Making charitable contributions is an ideal way to lower your tax burden and help charities of your choice. New tax laws have significantly changed how to make charitable contributions. Consider the effect of the expanded standard deduction, which is now double the amount it was in previous years. If your total charitable donations are less than the standard donation, you won’t receive a tax deduction for additional charitable contributions. A tax attorney can help you plan for charitable donations for the next several years.
Making Contribution to Retirement Plans
As the owner of a dental practice, making retirement fund contributions is an important way to help you and your employees save for retirement while decreasing your tax burden. You may consider setting up a SIMPLE Plan (Savings Incentive Match Plan for Employees). SIMPLE plans allow employers and employees to contribute to traditional IRAs. You can set up a cash balance plan to begin or catch up on your retirement savings.
In addition to contributing to retirement savings plans, you should consider contributing to employee-based health savings accounts (HSAs). These accounts are tax-free and used for medical and healthcare purchases. The maximum amount a person can contribute to an HSA in 2024 is up to $4,150 for individuals and $8,300 for families. There are no rollover limits for contributions to HSAs. Any amount left over at the end of the year rolls over automatically into the next year. Contributions into HSA accounts are tax-free.
Don’t Overlook Important Tax Deductions
Many dental practice owners significantly overpay their taxes yearly because they do not take full advantage of important tax deductions. The attorneys at Mahan Law will work with you to ensure you’re taking advantage of all of the income adjustments, tax credits, and deductions you’re entitled to. For example, if you’ve taken additional professional development courses to sharpen your business ownership skills, you may be able to deduct those expenses.
Are You Planning to Purchase New Equipment This Year?
Using a Section 179 tax deduction allows dental practices to take tax deductions for the cost of qualifying purchases, such as new equipment. Dental practice owners can deduct the cost of the year the equipment was purchased into service. Section 179 allows a tax deduction for up to $3,050,000 for 2023. The deduction can help lower your overall taxable income and potentially increase your cash flow.
To benefit from this deduction, you must purchase dental equipment before December 31st. You can deduct up to $3,050,000 in equipment costs, with a purchase limit of $2.9 million. You can save on your taxes as long as you purchase the equipment and put it into service at your dental practice within the same year.
Are you considering updating your dental practice with new equipment, tools, or technology to become more efficient and provide more up-to-date health care? If so, consulting with a tax planning attorney before making the purchases can help you understand whether you can use a Section 179 deduction.
Can You Accelerate Your Tax Deductions?
If you know you’ll need to purchase equipment or a significant amount of supplies in the upcoming year, you can prepay these expenses using an accelerated deduction. You can also prepay future expenses for your dental practice. For example, you could use a business credit card with a no-interest option so you don’t have to impair your cash flow. By paying for these expenses this year, you may be able to take advantage of a tax write-off now.
Did You Purchase or Renovate Your Dental Office Building?
If you purchased or improved your dental office, you may be able to take a significant tax deduction for your practice. You may also be able to participate in a cost segregation study that can help you reclassify your office building expenses and shorten the timeline for depreciation. Some potential benefits of cost segregation include maximizing your tax savings by adjusting the timing of your deductions. You can also create an audit trail to resolve IRS inquiries at the beginning stages. Finally, you can use unrecognized past depreciation retroactively.
Discuss Your Tax Plan with an Experienced Nationwide Dental Attorney
The attorneys at Mahan Law understand the importance of creating effective tax planning strategies. We work with dental practices to create custom-made rax strategies based on each dental practice’s needs and goals. Our attorneys will devise a tax strategy to optimize profits for your business by reducing your tax liabilities. Don’t hesitate to contact Mahan Law to schedule a complimentary case evaluation. We represent dental practices throughout the United States.
