Now that tax season is here, you’re probably gathering last year’s receipts and financial documents and preparing for the meetings with your dental CPA. Even though your CPA will handle the heavy lifting, here are a few common items that are essential to tax planning for dentists.
Tax Savings for 2019 and Beyond
Health insurance is an area where dentists can save money for their practices. You can deduct up to 100 percent of medical insurance premiums if you’re self-employed. Plus, you should set up, if you haven’t already, an HSA, or health savings account. The limits in 2019 are $3,500 for single filers and $7,000 for family coverage. If you’re age 55 or older, the additional catch-up contribution is $1,000.
You should also factor an annual Section 179 expense election into your tax planning. These are valuable at any time of the year, not just year-end. In 2019, the deduction limit is $1 million with a $2.5 million cap on equipment purchases. Bonus depreciation remains 100 percent for 2019. Are there any practice upgrades you want to make this year? Tax season could be the time to create a plan as part of an overall 2019 tax strategy.
Don’t forget business use of your vehicle, business meals with business colleagues, your cell phone expenses, and maybe business use for home internet and business-related travel.
Taxable Scenarios
Next, if your practice sells oral hygiene products, you might have to charge patients sales tax. Toothbrushes and waterpiks might include a sales tax, which means you’re also filing a state sales tax return. If the dental products you’re selling stay in patients’ mouths permanently, or are prescriptions, then sales tax may not apply.
Other common tax items for dentists are meals and entertainment, which was changed significantly in 2018. Make sure these expenses are properly organized and coded – your CPA will thank you. Finally, dentists often employ family members in the practice, even if the employee is your child during his or her summer break.
Last-Minute Tax Savings
If you think you’re in store for a bigger than expected tax bill in April, you might be able to make a retroactive contribution to a qualifying IRA or HSA account for 2018. As long as your contribution is received by the tax filing deadline, you can include it on your 2018 tax return. Learn why an HSA can be a powerful tax planning tool in Naden/Lean’s blog post from November 2018.
As a dentist, are you confused about how last year’s changes are affecting your tax return? Contact the Dental CPAs team here for questions or call us at 410-453-5500 to schedule your appointment to prepare your 2018 personal or dental practice taxes.