August 19, 2019
How to Maximize Tax Advantages for Your Dental Practice
With end-of-year budgeting in full swing, it’s never too early to start thinking about how to maximize your tax advantages. Any business owner knows every dollar counts, so every decision will only pay off every year. Here are some not-so-obvious ways to maximize the tax advantages for your dental practice now and into the future.
Practice ownership structures
If transitioning ownership, choosing the right business structure for your dental practice is a matter of saving thousands in tax dollars annually, in addition to making your practice run smoothly. The right structure will not only impact how the business pays taxes, but also how the dentists are compensated.
Like taxes on your mortgage, interest on your loan payment can be written off as a deduction. Consider taking out a longer-term loan with lower payments to increase the cash flow of the practice, similar to taking out an insurance policy.
What makes up the majority of your practice’s value — as much as 80% — is its goodwill, those non-categorized assets (think status within the community, practice name, staff loyalty and longevity, and brand awareness and marketing) for tax purposes that assist in the valuation process, help obtain the appropriate financing for the transaction, and mean you pay fewer taxes at closing.
When a business owner buys dental equipment, computers, furniture or any other assets for business uses, the owner can get tax deductions for buying and using them. Section 179 was put into place to allow for depreciation of capital expenditures in one year rather than spreading the deductions over a period of years. While all assets depreciate in value over time, Section 179’s Depreciation Schedule allows you to depreciate all assets up to a certain amount in the first year so that no taxes will be paid, in most cases.
Whether you’re in the process of a transition or deep into business ownership, contact the experts at Professional Transition Strategies to learn what tax advantages you might be missing out on.