Do you have more income tax liability on your dental practice than you need to? Tax Planning for Dentists is best done year-round, and not just in April. In March, many Michigan owners pass on receipts and wish for the best. That is a form of leaving money on the table. Our goal at Titan Tax Solutions is to help practice owners identify savings early and retain more profit. These seven often-overlooked dental tax deductions could help reduce your tax burden and improve your practice’s bottom line. Review each one, then bring your numbers to our team. Call Titan Tax Solutions today to schedule a consultation and discover how much your practice could save.
Why Year-Round Planning Matters for Dental Practices
Dental practices have a high income and a high cost. This combination lends ample opportunity for savvy tax planning by the dentist. But any plan must have a beginning date before December. The majority of owners operate as an S corporation, partnership, or LLC. Profits are transferred to your own advantage. Each time you deduct, your taxable income at home is reduced. The state of Michigan taxes income at a flat rate of 4.25%. Federal rates are considerably higher, so federal savings are most important.
- Section 179 and Bonus Depreciation on Equipment
Your chairs, CBCT, intraoral scanners, and CAD/CAM are expensive. The federal government now allows you to claim a lot of that expense in the first year. The 2026 Section 179 limit sits near $2.56 million. Plus, the 100% bonus depreciation expires forever on January 19, 2025. Multi-year distributions of these costs continue to be common in many practices. Others forget to submit for the placed-in-service date and have to forfeit the deduction. You can get financed equipment, too, so you don’t need cash in hand. Michigan does not have to abide by all the federal rules, so that’s why we are modeling both returns.
- Equipment worth reviewing:
- Digital imaging and scanners
- Lasers and sterilisation machines.
- Practice management software and computers.
- Build-Out Costs and Cost Segregation
Has an operatory been remodeled or have an office building been purchased? Many owners depreciate anything over 39 years. That slow speed is a cash tie that can be released today. A cost segregation study breaks down the building into components that depreciate more quickly. Qualified improvement property might also include interior improvements that qualify for bonus depreciation. There’s a cost associated with the study, which is why we get our tax planning team to do the numbers first. If the savings are not worth it, then we let you know.
- The Michigan Flow-Through Entity Tax Election
S corporations and partnerships are allowed to pay state tax at the entity level in Michigan. The rate is the same as the individual rate, which is 4.25%. The owners then get a credit on their individual returns. The entity payment is a tax-deductible business expense, which may help to reduce federal tax. This benefit is reduced for some federal SALT cap owners. High earners often will still benefit because the cap is reduced with higher earnings. You are also committed to the election for three tax years. Smart Tax Planning for Dentists is a yearly consideration of those trade-offs.
- The QBI Deduction for Dentists
The newly qualified Deduction for business income (QBI) is now permanent at 20%. However, dentistry is a type of specified service business. The deduction reduces and may even cease to exist at higher income levels. That means the income level is something you should plan for.
Three moves that can frequently be of assistance:
- Minimize taxes on income in the phase-out window
- Discuss owner pay and reasonable compensation
- Keep the cost of major equipment purchases in high income years
- Cash Balance Plans Paired With a 401(k)
You can use a cash balance plan in addition to your profit sharing plan. They can increase your retirement savings by much more than you can save by themselves. Those add-ups reduce your taxable income immediately. The design is influenced by your age and staff mix, so you’ll see the impact on taxes first. Your plan administrator takes care of the legal arrangement.
- Purchase Price Allocation When You Buy a Practice
Buying a practice? Your purchase contract breaks down into goodwill, equipment, and supplies. Goodwill amortization is allowed over 15 years under the tax code. Bonus Depreciation may be claimed immediately for certain equipment. The split should be raised early because if it is not good, it will result in some deductions.
- Accountable Plans and Owner Benefits
The practice expenses are frequently paid by the owners from their own means. If you don’t have an accountable plan, you won’t be able to deduct those costs on your personal return. A written plan will allow you to be reimbursed for Home Office expenses, mileage, and phone usage by the practice. Check out these other dental tax deductions as well:
- Continuing education, courses, and travel related to continuing education
- Rates for licenses, DEA, and professional association fees.
- Loupes, headlights, and necessary work clothes.
- Premiums for health insurance for S corporation owners
Why Michigan Dentists Choose Titan Tax Solutions
With over 30 years of experience, Titan Tax Solutions can assist you with your tax needs. We prepare and plan your taxes for both your practice and your personal tax return. Clear pricing, quick turnaround, and a 100% satisfaction guarantee. Our dental clinical controller services also ensure your books are accurate, and planning begins with clean numbers. What do dental CPA Michigan practices look for in search? Dentists in Troy, MI and throughout Oakland County and Metro Detroit are served by our office. We also conduct outreach with practices throughout the state. You receive one team that will plan, file and respond to your calls.
Start Smarter Tax Planning Today
Tax Planning for Dentists is a year-end strategy that benefits if done before the end of the year. Select one or two of these dentist tax strategies and do so. We review your practice, type of entity and goals. After that, we create a clear plan with no hidden costs! Information provided here is general information and should not be considered personal tax advice.
Frequently Asked Questions
What are the biggest tax deductions for dentists in Michigan?
The top items are equipment write-offs under Section 179 and bonus depreciation. Next are retirement plan contributions, the QBI deduction, and the Michigan flow-through entity tax election. Next are retirement plan contributions, the QBI deduction and the Michigan flow-through entity tax election. These are based on your type of entity and income.
Are dentists allowed to deduct the equipment cost in one year?
Often, yes. Section 179 and 100% bonus depreciation provide for a 100% first-year deduction on equipment that qualifies. This item needs to be in service at the end of the year.
What’s the benefit of the Michigan flow-through entity tax election?
This can be particularly beneficial for those with higher incomes. The election is for three tax years and the increased federal SALT limit alters the numbers. Check the numbers first, before you vote!
What is the best time for dentists to begin tax planning?
Review the plan quarterly, beginning of the year. Equipment comes with a lead time.There is a lead time in the purchase and retirement of equipment. If you put it off until December, you’ll have fewer options.
But how do I select an MI Dental CPA for my practice?
Seek dental experience, year-round support, and transparent pricing. Inquire about handling of equipment, retirement plans, and Michigan entity taxes. Select someone who works with you, rather than someone who just applies for you.
Talk to Our Tax Experts Today
Looking to save some money on your taxes and have a better plan of action? Give us a call today at (248) 524-5240 to schedule an appointment with Titan Tax Solutions. Let’s collaborate on your practice tax plan.
Follow us on Facebook for more details.
