Tax saving tips every dentist needs to know

11 New Ways a Dentist Can Save on Taxes That You Did Not Know.

#4 Will Shock You!

It’s rapidly approaching tax season once again. Working with thousands of dentists and other physicians over the years, we have found tax literacy among doctors to be particularly low. We thought as a year end update we would offer a few new pieces of information that most dentists would appreciate learning – and these tips can save you some serious money in your tax bill come April 15th. 

Let’s take a look at 11 new ways you can reduce your tax bill.

Follow these 11 tax tips for great ways to save on your tax bill

#1 Be Wise With Your Expenses

Many self-employed doctors miss out on all kinds of tax deductions just because they don’t realize what is deductible and what isn’t.  If you are a sole proprietor, partner, or a contractor, it would behoove you to keep careful records of your business expenses. Travel, meals, accommodations, office equipment, and supplies, medical equipment, CME expenses, licensing fees, communication expenses, board exam fees, and the list goes on and on and on.

#2 Don’t Forget Your Mortgage Interest

Many dentists find themselves with hefty loans, including consumer loans, car loans, credit cards, student loans, home equity loans, investing loans, and mortgages. If you’re going to maintain these loans, you might as well convert them into loans that have a low rate and are tax deductible. Refinancing a mortgage into a 4% $400K loan and paying off the student loans would lower the interest rate on the mortgage, lower the interest rate on the student loans, and make the student loan interest deductible.

#3 Maximize Your Retirement Accounts

Are you deferring wages into a 401(k) plan? If possible, contribute as much as you can. The maximum amount you can defer to your 401(k) plan for 2018 is $18,000, with an extra $6,000 if you’re over the age of 50. That’s a lot of money you can put away each year. Talk to your tax advisor to see if you should be doing Roth deferrals or pretax deferrals as we can see if you can save money for retirement using “backdoor” Roth conversion.

#4 50% Tax Credit for New Website

This is perhaps the biggest cost-saving effort you can make to save money on your taxes and improve your practice. An “accessible” website is a website that is designed to cater to individuals who have disabilities. This might include those with visual impairments, limited physical mobility or hearing loss. Dental practices that upgrade to an accessible website are now eligible for up to a 50% tax credit by making these websites accessible to all.

#5 Did You Purchase New Equipment?

There are a few different ways to speed up the expensing of your new equipment that can help lower your taxable income. First, there is the Section 179 deduction. This deduction allows you to immediately expense up to $510,000 in the purchase of new or used equipment. Please note that if you purchased more than $2.03 million in equipment, the Section 179 expense is reduced dollar for dollar over the $2.03 million.

#6 Maximize Medical Benefits

Medical benefits are often some of the most overlooked areas with regard to a smart tax strategy. By not using pre-tax dollars to pay for medical expenses, you risk a larger tax bill, and you actually lower your profits by not maximizing deductible business expenses. Sole proprietorships offer fewer options than corporate structures to most effectively integrate medical benefits into your tax plan.

#7 Hire Family Members

Taking advantage of the IRS-sanctioned tax strategy of employing your dependents can provide payroll tax deductions for hiring family members while helping your children earn money for college or other expenses. Under IRS rules, children under age 21 are not required to pay unemployment taxes, and children under 18 don’t pay payroll taxes, Social Security, Medicare, or unemployment taxes. Your kids also do not pay FICA or Medicare taxes on their wages.

#8 Consider Donating to Charities

Why not donate some property, such as stocks or land, instead of just cash. The deduction you receive on your tax return is the fair market value of the property donated and you won’t be taxed on the gain. This means that if you have appreciated the property and you’re thinking of getting rid of it, this would be a great way to get a tax deduction. In order for your charitable donation of cash or property to be tax deductible, make sure you are donating to a 501(c)(3) organization.

#9 Standard Mileage vs. Actual Miles

Mistakes in this area come from inconsistent use of methods. If your car is for business purposes only, then the entire cost of its operation can be deducted. However, if the car is used for both business and personal use, only the cost of its business use can be deducted. The amount of your deductible car expense can be found using either the standard mileage rate method or the actual expense method. Figure your deduction with both methods initially to see which gives you the larger of the deductions.

#10 Send Your Children Off to College!

Consider contributing to a 529 plan. A 529 plan is set up as a tax savings plan because the earnings on the amounts contributed are tax-free as long as the distributions are used for qualified educational expenses. Depending on the state you live in, you may receive a tax benefit if you contribute to that state’s 529 plan. For 2018, the deduction would be a maximum of $3,140 and any contribution above that in 2018 would carry over to the following years.

#11 Plan for Next Year Now

Saving on taxes starts with a forward-looking tax strategy. Unlike tax preparation (which organizes what’s already taken place), tax planning helps you take strategic actions in active tax years. There are provisions in the laws that allow dentists to structure their financial affairs in such a way that their tax liability is minimized. Meet with your tax advisor no later than 90 days after filing to review your previous year’s tax return and plan for the current year.

We know as well as you do that running a dental practice takes a lot of time and effort, but it also takes a serious amount of money. Fortunately, there are numerous tax benefits for dentists that help to offset these costs. The IRS offers several tax benefits for dentists, some of which are typical business deductions and others that specifically help small businesses become more productive by lowering the cost of equipment.

Take a look again at #4, this one alone can shave up to $5000 from your taxes that are due!

The tax credit for updating you website is available to businesses who have made $1,000,000 or less in the previous year or have 30 or fewer employees. This tax credit can be used to cover the cost of access expenditures up to $10,250 (maximum credit of $5,000). In addition to being used to remove barriers or offer accessible formats, it can also be used to create an accessible website that has proper color contrast, tagging, and more. (Source:ada.gov)

Share this post

Share on facebook
Share on google
Share on twitter
Share on linkedin
Share on pinterest
Share on print
Share on email
What do you think about this article?
1 Star2 Stars3 Stars4 Stars5 Stars (5 votes, average: 4.80 out of 5)
Loading...

Subscribe