As a dentist, there are few considerations to take: which business entity to operate under, which bookkeeping method to use, which accounting software will best suit your needs, and how to plan for tax deductions and tax credits. What follows is a brief overview of dental practice accounting.
- Sole Proprietorship –as a sole proprietor, you’ll pay a self employment tax of 15.3%.
- LLC– this selection can be taxed either as a Sole Proprietorship or as an S Corp
- Partnership – when two or more owners share in losses and profits
- C Corporation – taxed at the Corporate level and on dividends
- S Corporation – avoids double taxation and saves on Self Employment Taxes
As a dental professional, the entity you select will depend on your specific circumstances.
Auto deductions are standard deduction for those working in dentistry. There are two means of claiming this deduction.
Actual Expense Method
- Expenses such as oil changes, gas, repairs, tires, loan interest, etc.
- Deducting the business portion of actual expenses to operate your vehicle
- Standard Mileage Deduction
- Business travel expense miles include meeting with clients, trips to the bank, post office, etc.
- In 2011 this deduction is 51 cents per mile
Home Office Deductions
Home office deductions are another often utilized deduction for dentists. Before you set up your practice, it’s best to know what qualifies.
- Calculate the deduction using the square foot method – this method determines what is deductible on insurance, mortgage interest, property taxes, rent, etc. by establishing the percentage of square feet your office occupies versus the square feet of your entire home.
- If you use your garage to store inventory or a 100% business use work vehicle then you may be able to deduct for that space as well.
Equipment Expenses Deductions
- Own – depreciated over a useful life
- Lease – deductible as incurred
These are just some considerations that can affect a dentists tax dollars.
Whether you’ve already started your dental practice or you haven’t yet started your dental practice, you’ll want to seek the counsel of a certified public accountant that can help you form a tax saving strategy tailored to you and the profession of dentistry. We can help with this. Just give us a call at 1-425-483-6600 or send us an email at firstname.lastname@example.org.