Tax write-offs are a great way for dentists to lower their tax liabilities, and by working with a tax expert who specializes in the dental industry, you can find out what write-offs you might be eligible for.
Here are 5 top tax write offs for dentists to give you an idea of what options you may be able to explore with your chosen tax expert:
Paying your kids
By giving your child a job of some description within your dental practice, and getting them officially on the payroll, you can use the money that you would otherwise have spent on them – or put aside for their future – in a more tax efficient way.
You won’t be required to pay taxes for them provided you keep their pay beneath the threshold for standard deductions, but remember that the money must be allocated for the child and be used for their benefit.
Talk to a dental tax expert about how best to do this.
Augusta Rule
If you’re a dentist who owns their own practice, you may be able to use your home for a tax deduction, by renting it out for up to 14 days. Let’s say you host a company retreat at your home, you then pay yourself rent from your business, which is classed as non-taxable income. Be sure to check local rental prices to ensure that you’re paying yourself what is deemed to be a reasonable amount. Note that this particular write-off is best carried out with guidance from a tax professional, as it may trigger an audit if not managed appropriately.
Health Savings Account, or HSA
As one of the most tax advantaged accounts available in the U.S. today, when used appropriately, HSAs can help you pay for your medical expenses in a manner that’s more tax-efficient. Note that this account is only available if you’ve got a High Deductible Health Plan, but not all HDHPs have an HSA.
By making a contribution up to the annual maximum (a tax expert can advise you of the current annual maximum), deducting it from your own taxable income, and then investing the amount in an HSA, you won’t have to pay any taxes on it if you use it for a medical expense that qualifies.
Section 179
Section 179 enables dental practice owners to take a deduction immediately for significant expenses, such as equipment and other depreciating assets, that qualify. Note that to qualify, the equipment must be used for your business more than 50% of the time.
For this particular tax write-off, seeking help from a dental tax expert is advised, so that you can be sure to take the deduction at the best time.
Retirement plans
If as a dentist, you’re in the top tax bracket and would like to lower your tax liability, or you need the deduction in a given year, this strategy might prove particularly effective. By contributing to a Traditional IRA or 401(k), you can take a tax reduction for dentists that goes up to the annual limit, which if you’re 50 or above, is higher.
Although these strategies may prove enticing, every dentist’s situation is different, and there might be other write-offs you could benefit from as a dentist, too. With this in mind, consulting with a specialist dental tax advisor becomes the simplest and most convenient way to find out just what write-offs you could qualify for; your investment in their expertise, could prove extremely lucrative for you and your practice.