5 Tax Saving Ideas for Dentists
We speak with dentists every day, and if there’s one thing we’ve come to discover time and time again is the need of dentists seeking relief on their dental practice taxes. Most dental practices are considered small businesses and, as a result, tend to suffer from the burden of business taxes. The good news is that you don’t have to be locked into every single tax out there. In fact, there are several options available to help you save on taxes paid by dentists.*
- 50% Tax Credit for Adding an Accessible Website
Yeah, you read that right. The IRS may allow up to a 50% tax credit for dental practices that upgrade to an accessible dental website. This is because website accessibility is an important part of ensuring businesses adhere to the ADA – Americans With Disabilities Act. In the past, people used to think that the ADA only applied to the physical aspect of a business, but the truth is it now extends to any part of a business where people need to access it. When it comes to your website, it’s important that it caters to people who have visual impairments and hearing loss, as well as other disabilities. By not catering to this audience you’re losing out on exposure and alienating a large percentage of the population.
Read more about website accessibility in this article.
- Examine Your Retirement Plan
There’s a variety of retirement plans available to dentists today. From 401(k) to Simple IRAs and everything in between, choosing the best plan for your practice will depend on everything from the size of your practice to the age of employees and so forth.Get with a qualified retirement specialist to determine which retirement plan will be best both for your employees and for your 2017 tax reductions. Some plans have contribution limits, whereas others, like profit sharing, offer more flexibility.
- Consider the Implications of Your Expenses
There are several expenses that you can deduct from your bottom line and use to reduce your taxable income.You can deduct 50% of your meal and entertainment expenses if they are related to your business. An additional 100% of the cost of six meals can be deducted if every employee is invited to attend where the meal is being served. This could include something like a holiday party or a celebration (reaching year-end goals, launching another location, etc.).If you have children you can actually get a tax deduction for child care by paying your adult children to babysit your children under 16 years of age. Children under 7 can have a deduction of up to $7,000 and children aged 7-16 can get a $4,000 deduction.
- Always Plan Ahead
With the new tax reform recently passed under the current administration, it’s important that you plan ahead and begin talking with a tax professional to prepare for next year’s changes. Things like the deductions available for child care, as well as tax brackets, have changed for the 2018 tax season.Understanding these changes and what they mean to your business can be confusing and navigating them on your own can cost you, in the end, so find a professional you can trust and begin working toward next year’s goals.
- Be Wise in Choosing Your Business Structure
This is an important part to figure out preferably before you launch your business, as changing your business structure after it has been established is much more difficult.Most business analysts agree that it’s most beneficial to establish a practice under more than one entity using a corporate structure. This allows for income shifting, where you can lower your taxes by reducing your taxable business income.As an example, you could form different corporate entities who have different year ends. According to DentistryIQ, “under this strategy, the “S” Corporation would be your core business and receive all gross business income. Your “C” Corporation would receive money from the “S” Corporation to pay for advertising, marketing, and management expenses. In this scenario, the core business earning $100,000 in gross income could reduce taxable income in the “S” Corporation.”As you income shift you deduct your income from the “C” corporation (check with your tax professional to understand the tax code deductions guide). You can save 15.3% in taxes compared to what you would pay under a sole proprietorship or partnership. This is because under the latter two structures all of your income is subject to self-employment taxes.