Dental Practice Overhead Costs – Everything You Need To Know
In simple terms, “overhead” simply means the costs of doing business at your dental practice. Cutting back on overhead costs can be a good way to streamline your practice, and there are also lots of tax deductions you can take to help improve your overall finances. Read on to learn more about dental practice overhead costs from our team of dentist CPAs at Tooth & Coin.
The Difference Between Fixed And Variable Overhead Costs
First, it’s important to understand that there are both fixed and variable overhead costs. For example, if you lease your office and pay $10,000 a month, you will be paying $120,000 per year for your lease, regardless of how many patients you see. This is a fixed cost. Similarly, if you purchase a $50,000 CBCT x-ray machine, it will still cost $50,000, no matter how many patients your practice has.
However, there are other types of overhead that may be variable. For example, if you see more patients, you may need to purchase more paper bibs, digital x-ray sensor sleeves, floss and toothbrushes to give away after appointments, and so on. Variable costs can change over time. They typically grow as you get more patients.
Common Examples Of Dental Practice Overhead Costs
What contributes to overhead? Great question. Broadly speaking, you can split dental practice overhead costs into a few different categories:
- Staffing – Wages, salaries, and benefits paid to dental and office staff, contracted dentists, and other personnel at your business.
- Owner’s compensation – You can also consider your own salary or payment to be an overhead cost. This may include splitting profits or payments with other dentists or stakeholders.
- Facility costs – This may include rent, utilities, mortgage, hiring cleaning staff, maintenance, and making improvements to your office.
- Administrative costs – This includes human resources, insurance, office supplies, payroll costs, dental marketing, paying vendors, purchasing business technology like computers or software, and other costs associated with administering your business and keeping it running smoothly.
- Clinical costs and supplies – This could include PPE for staff members, investing in new dental technology and equipment, servicing existing equipment, disposing of medical waste, and all other costs associated with the actual practice of dentistry.
- Discretionary costs – This is often where dentists can cut back. This may include travel for conferences, paying for continuing education, company cars, business meals, gifts, fees for professional societies, and other such discretionary purchases.
Deducting Qualifying Overhead Costs Can Result In Serious Tax Advantages
Not all overhead costs are tax-deductible. However, some things, like investing in new dental equipment, can qualify for major tax breaks under the Section 179 tax deduction. You can also deduct dental and lab supplies, office expenses, payroll taxes, and much more.
If you’re looking to cut your dental overhead expenses and maximize your tax advantages, Tooth & Coin is here to help. As dental practice accountants, we’re deeply familiar with the strategies you can use to maximize savings and minimize taxes at your practice. Schedule a consultation with Jonathan VanHorn right away, and take the first steps toward cutting dental practice overhead costs.