Tax Deductions That Many Dentists Miss – Cut Your Tax Bill With These 5 Tips
When tax season rolls around, many dentists look for ways to cut their tax bills and maximize their profits. Working with an experienced dental accountant is one of the best ways to save on your taxes. The team at Tooth & Coin can identify lots of tax deductions that dentists often miss on their own. And in this blog, we’re going to discuss a few of these.
1. Using A C Corp Instead Of An S Corp
As we’ve discussed in detail in a previous blog post, S corps are usually the best option for dentists. They avoid double taxation, unlike C corps, which can save you tens of thousands of dollars during tax season.
S corps are also better than sole proprietorships. Not only do they create legal separation between dentists and their business, but filing as an S corp also opens up a lot of other tax breaks. So if you’re still running as a C corp or a sole proprietorship, opting to switch to an S corp could save you quite a bit of money.
2. Tax Deduction For Section 199 Domestic Production Activities
If you have a CEREC CAD/CAM machine and manufacture veneers, crowns, and other treatments in your office, you may qualify for this tax deduction. Under Section 199, you can deduct 9% of the profit from any activity that’s considered to be “manufacturing.”
Depending on how often you use these machines, this could save you thousands of dollars. However, it’s important to work with a tax professional like Jonathan VanHorn to make sure you file this tax deduction correctly and avoid potential penalties.
3. Not Deducting Your Business-Related Auto Expenses
You can’t deduct the cost of traveling from your home to your office. This does not qualify as a business activity. However, there are lots of other things that count as business-related travel. For example, if you drive to the bank or the post office, you can deduct this from your expenses.
You can also deduct business trips, trips to Continuing Education (CE) courses, and the costs of other business-related travel. An accountant can help you maximize all these deductions, and it’s a good idea to use an app or spreadsheet to track all of your travel miles and costs every year.
4. 100% Tax Deductible Meals
Most meals related to your business are 50% deductible, but you can also save with a 100% deduction for certain types of meals and food. Among others, these include:
- Office snacks offered to employees
- Recreational expenses like office parties and picnics for employees
- Meals provided for more than half of all employees for the “employer’s convenience,” such as ordering pizza so that employees can work late or on the weekend
- Any meals or foods made available to the public for promotional/marketing purposes, such as free cookies for patients
Again, working with an accountant is important for maximizing these deductions. You’ll also need to keep receipts and/or invoices of meals and food to prove your spending on these meals.
5. Cost Segregation To Shorten Depreciation Time
A cost segregation study can be used to identify and reclassify certain property and assets within a building, shortening the depreciation time from 39 years (the standard for commercial property) to just 5, 7, or 15 years.
This allows you to benefit from depreciation over a shorter period of time, and can lead to significant tax breaks. This is particularly true if you’ve just built a new office or have made major renovations to your building.
Looking For A Lower Tax Bill? Contact Tooth & Coin!
As experienced dental accountants, Jonathan VanHorn and our team serve dentists nationwide. With our knowledge of federal and state tax deductions and detail-oriented approach, we’ll leave no stone unturned. Our team will work closely with you to minimize your tax bill and maximize your deductions. To learn more about what we do, give us a call at (877) 265-2121 or schedule a consultation with Jonathan today.