Year-End Tax Tips for Dental Practices

The end of the year is fast approaching, making it the perfect time for independent dental practices to take strategic tax planning steps. Proper financial planning can minimize tax liability, maximize deductions, and improve cash flow going into the next year.

Here are key strategies to help reduce your tax burden and optimize your practice’s financial health before the year closes.

1. Accelerate Deductions

If you anticipate significant business expenses in the upcoming year, consider prepaying for them before December 31st. This strategy allows:

• An accelerated deduction for supplies, lab expenses, and equipment
• The ability to reduce taxable income for the current year
• Flexible payment options, including credit cards, to maintain cash flow

By taking advantage of early tax write-offs, you can strategically lower your practice’s taxable income before the year-end deadline.

2. Invest in New Equipment Before Year-End

The IRS allows for 100% bonus depreciation and increased Section 179 deductions, making it a great time to invest in new dental equipment, office furniture, or technology. To qualify for the deduction, assets must be purchased and in use by December 31st.

Strategic investments before year-end can help:

• Modernize your practice with updated technology
• Increase efficiency with new equipment
• Reduce taxable income through immediate write-offs

Planning your equipment purchases wisely ensures your practice maximizes tax benefits while improving operational efficiency.

3. Defer Income to the Next Year

For practices in a strong financial position, deferring income to the following year can help minimize the current year’s tax burden. Consider:

• Slowing down billing and collections toward year-end
• Sending invoices late in December, ensuring payments are received in January
• Delaying elective procedures for patients who prefer appointments in the new year

This strategy allows for greater control over your taxable income while maintaining steady revenue flow.

4. Hire Your Children to Reduce Taxable Income

If you own your dental practice, putting your children on payroll can provide tax advantages while allowing you to save for their future. Benefits include:

• Lowering taxable income by shifting income to a lower tax bracket
• Funding tax-free savings, such as a Roth IRA or college savings account
• Assigning children simple tasks like office cleaning or marketing assistance

Make sure to follow IRS guidelines on age restrictions and allowable tasks to fully comply with tax laws.

5. Maximize Retirement Contributions

Many independent dentists overlook retirement planning, but maximizing contributions can provide:

• Immediate tax savings by reducing taxable income
• Long-term financial security beyond your practice
• Access to multiple retirement options, including:
  • 401(k) and Roth 401(k)
  • SEP IRA and SIMPLE IRA
  • Profit-sharing or defined benefit plans

If you haven’t fully funded your retirement accounts, now is the time to take advantage of tax-deferred savings.

6. Get a Second Opinion on Your Tax Strategy

Even if you have a CPA, a second opinion on your taxes can uncover additional savings. Dental tax specialists can:

• Review previous tax returns for missed deductions
• Identify cost-saving opportunities specific to dental practices
• Ensure compliance with the latest tax regulations

If amendments to past tax returns are needed, they can be updated within three years of filing—potentially leading to unexpected refunds.

Plan for a Strong Financial Future with Dentalink IPA

At Dentalink IPA, we help independent dentists optimize expenses, reduce overhead, and maximize financial efficiency through:

• Exclusive vendor discounts on supplies, labs, and services
• Cost-saving strategies for practice growth
• Financial guidance to improve profitability

Join Dentalink IPA Today and gain access to expert resources that help you build a financially stable practice.

Want professional insights on tax planning and cost reduction? Request a Demo to explore how Dentalink IPA can support your financial success.