It’s tax season again, and soon you will be meeting with your dental CPA to prepare and file your 2017 tax return (if you haven’t already). Whether this is your first tax season as the owner of a dental practice or your 25th, taxes remain a stressful and time-consuming process for many dentists. We’re here to make sure you get the most out of your tax planning process.
Below, we provide five areas that dentist should make sure to capitalize on for their tax return this year.
Did you miss our blog post from last year? We provided five points to be more prepared during tax season.
Domestic Production Activities Deduction
If you make crowns and other restorations, implants, lab items, printed x-rays and images, you can use the Sec. 199 deduction.
Sec. 179 Deduction and Bonus Depreciation
Section 179 expensing and bonus depreciation are extremely valuable tax tools for dental practices. Whether you purchase something small, like a new computer for your front office staff, or make a large investment in operatories or imaging machines, you can put money back into your dental practice with Sec. 179 and bonus depreciation.
There are two ways to benefit from health insurance on your taxes if you’re a dentist: HSAs and health insurance deduction. If you have a Health Savings Account and fund it at the maximum level, you can deduct up to $3,400 for a single policy and $6,750 for a family policy. If you’re over 55, there are catch-up contributions of $1,000 available. What’s more, you have until April 17, Tax Day, to make catch-up contributions to take full advantage of this deduction.
For health insurance, dentists can use the self-employed health insurance deduction to deduct 100 percent of the cost.
Setting up and maintaining a retirement account for dentists remains a smart choice for long-term planning and short-term tax savings. If you started a pension in 2017, there’s a tax credit equal to $500 for the first three years of the plan. Additionally, you can put money toward a nondeductible IRA, up to $5,500 ($6,500 if you’re older than 50) and avoid paying the 3.8 percent tax on investment income.
Children and Dependents
If you employed your children in your dental practice in 2017, file them on a separate return. You can also take a credit up to 20 percent on child care expenses up to $600 per child or $1,200 for more than one child. Private school and summer camp, with proper documentation, are also included.
As always, if you have questions about your personal situation, contact the team at Dental CPAs.