I have had a dental practice (LLC) for the past 10 yrs. This year, I have purchased an office condo to move into in the next year or so. The office condo is owned by a different entity (LLC). Is there a way to deduct all (or part of) the expenses such as the cost of the new condo, monthly condo fees, as well as the expenses for the construction?

Currently, the new LLC that owns the office condo does not have any income, but all the expenses. So far I have been paying those expenses from my salary (out  of pocket),  but I would like to see if I can make my dental LLC, or another entity arrangement to take up the expenses (pre-tax) to reduce my overall tax burden?

Please advise. I greatly appreciate it.

If both LLCs are disregarded entities then it’s actually fairly simple; just have the practice pay ALL of the expenses of the condo.

From your practice you’ll depreciate the condo over 39 years. You may have to allocate a portion of the cost to land which is not depreciable, but you can deduct the annual operating expenses like condo fees, utilities, insurance, real estate taxes, etc., and the mortgage interest expense.

Generally, loan costs can usually be amortized over the life of the loan.

Now if the practice is being taxed as a corporation, that changes a few things.

Talk to your CPA, they should be able to square you away.

I deeply appreciate your response.  I don’t know why my accountant did not tell me these things.
I was just talking to a friend of mine over the phone and she told me her dental business is an LLC but her accountant files her taxes as S corp.  She did not have to pay a lot of self employment taxes.  My accountant used Schedule C for me for year 2011 and I paid $15,000 of self employment taxes.  Would I save money on taxes if I request my accountant to file my taxes as S-Corp?You might save money. There are benefits and costs to electing to be taxed as an S-Corp so you’d have to run the numbers to make the call.

My accountant also said the only way I can deduct the new office condo expenses is to form a third company that is on top of the two LLCs and this way they are connected and I can carry the cost from one to the other. Please advise me on this.Sorry, I’m at a loss as to why you would need to do that.

I forgot to ask what do you mean when you say “if two entities are disregarded”?  Do you mean if they are separate and independent? 

No, a single member LLC that does not elect to be taxed as a corporation is treated as a “disregarded entity” from the IRS’s perspective. This means that you’re simply a sole proprietor for income tax reporting purposes.

I am planning to change my CPA.  How important is it to get a “DentalCPA”?  Of course you guys are both Dental CPAs, and perhaps you would encourage a Dental CPA, but is it very critical to have a Dental CPA?
There are a number of posts this year that go into the benefits of using a dental CPA and you can also read Dr. Howard Farran’s April 2012 monthlyarticle on the advantages of using a Dental CPA.

I just received my bill from my CPA and I had a mini heart attack.  He had charged me $2700.00 just to file end of the year taxes for a disregarded LLC.  Would be paying more if I use a dental CPA?Without knowing exactly what the bill was for (i.e., specific services covered) I can’t comment on the $2,700 or if our fee would be more or less.

Is it OK to discuss a CPA fees before making a commitment?Do your patients want to know what the fees will be for certain procedures you’re advising? The clear answer is absolutely!

This first appeared on Dentaltown.