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Stop Losing Money: Tax Strategies Every Dentist Needs to Know

Are you paying more in taxes than necessary? Many dentists focus their entire careers on making more money, unaware of how much they’re losing to taxes. What if you could save tens of thousands of dollars each year simply by making a few strategic changes? Intrigued?

If you’d rather watch a deep dive into this topic, check out my YouTube interview with tax strategist Roger from Strategic Associates.

 

Why Taxes Are Draining Your Practice’s Profits

As dentists, we’re trained to prioritize growing our practices and maximizing production. But this focus often leads us to overlook a major expense: taxes. Traditional accounting—where your CPA helps you file your taxes—isn’t enough. To save significant money, you need tax planning, a proactive approach designed to minimize your taxable income and keep more of your hard-earned revenue in your pocket.

The Difference Between Tax Preparation and Tax Planning

Most dentists work with tax preparers who file their taxes accurately but offer little in the way of strategic advice. Tax planners, however, focus on identifying ways to reduce your taxable income throughout the year. This can mean the difference between barely scraping by and saving tens of thousands of dollars annually.

When Should You Start Tax Planning?

The best time to start tax planning is before the end of the year. Tax planners analyze your practice’s financials in October–December, providing actionable strategies to lower your tax liability before the year closes. This proactive approach puts you in control of your finances, rather than reacting during tax season.

Four Tax Strategies Every Dentist Should Know

Tax savings for dentists fall into four main categories. Here’s how each one can benefit your practice.

1. Maximize Business Deductions

Many dentists already deduct common expenses, but advanced strategies like Section 831(b) private reinsurance allow you to create your own insurance company. This lets you deduct funds for risks like patient complaints, equipment failure, or staff issues. Instead of paying premiums to an external insurer, you build a tax-advantaged fund to protect your practice.

2. Leverage Business Ownership

Owning multiple businesses can unlock significant tax advantages. For instance, creating a new entity separate from your dental practice can offset income and reduce your tax burden.

3. Optimize Personal Deductions

If you donate to charity, you’re already familiar with personal deductions. However, advanced programs can amplify the impact of your donations, allowing you to reduce your adjusted gross income (AGI) by as much as eight times your contribution. For example, donating $50,000 could generate a $250,000 deduction under the right program.

4. Take Advantage of Tax Credits

Unlike deductions, tax credits directly reduce your tax liability. Dentists can purchase tax credits at a discount—paying $65,000 for a $100,000 credit, for example—and instantly save $35,000.

Common Tax Challenges Dentists Face

“I’m an Associate Dentist. What Can I Do?”

If you’re a W-2 employee, options like creating a separate side business or using charitable giving strategies can still help reduce your tax burden. While your choices may be more limited, strategic planning is still possible.

“I’m Selling My Practice. How Do I Avoid a Huge Tax Bill?”

Selling a practice without tax planning can result in losing up to 50% of your proceeds to taxes. Strategic Ownership Programs (SOPs), for example, create a negative K-1 to offset the income from your sale. By planning ahead, you can maximize the value of your hard work and preserve your wealth.

A Hidden Gem for Dentists: Section 831(b) Insurance

One of the most powerful tax strategies for dentists is the Section 831(b) private reinsurance program. This allows you to create your own insurance company to cover risks that standard policies don’t address, such as patient complaints or warranty issues.

Case Study: Dental Warranty Programs

Imagine you offer an implied warranty for crowns or orthodontic brackets. Each time a patient returns for a repair, it costs you time and money. By formalizing this warranty, you can deduct a percentage of each procedure’s revenue into a private insurance fund. This fund grows tax-advantaged and can be withdrawn later at a lower capital gains rate, saving you money while protecting your practice.

Why Dentists Need Advanced Tax Strategies

As Roger from Strategic Associates says, “Common incomes use common strategies, but uncommon incomes require uncommon planning.” High-income dentists should be taking advantage of the same tax strategies used by Fortune 500 companies. These opportunities aren’t just for the ultra-wealthy—they’re for anyone willing to learn and implement them.

Take Control of Your Taxes Today

Proactive tax planning isn’t just about saving money—it’s about reinvesting in your practice, your family, and your future. Whether you’re looking to reduce your tax liability or plan for a major event like selling your practice, the right strategies can make all the difference.

Want to learn more? Watch my full conversation with Roger on YouTube to discover how these advanced tax strategies can transform your financial outlook. Stop letting taxes hold you back—start building a smarter, more profitable practice today!