Forgotten Tax Deductions

It’s estimated that most dental practices overpay their taxes. We don’t want yours to be one of them!

There are several deductions where your dental practice could be saving money on taxes, even on everyday expenses. Two words to keep in mind when claiming dental tax deductions: ordinary and necessary. Both conditions must apply for the expense to be tax deductible.

Read below for eight dental tax deductions to keep more money in your practice. 

Some tax deductions you’re probably already aware of, like premiums for malpractice insurance or the 50 percent deduction for meals and entertainment.

 Talk to your tax advisor to see what applies in your situation.

Supplies

Everything from toothbrushes to cotton balls to dental eyewear can and should be tracked – and deducted. This includes office stationery and administrative supplies.

Lab Fees

Lab fees can be 10 percent or more of your practice’s budget, so make them count on your taxes. Think x-rays, crowns, partials, molds, and dentures. Keep track of these fees for tax savings.

Continuing Education

Even if you don’t consider yourself a lifelong learner, your office’s yearly subscription to a dental industry magazine could be tax deductible. So could your costs and fees associated with exams, licensing, conferences, and certifications. Go ahead and pursue that specialty!

Vehicles

There are three ways to deduct vehicle expenses: 1) buy the vehicle through your dental practice (if your business structure is a corporation), and include personal vehicle expenses as income on your individual tax return 2) track mileage expenses or 3) track actual expenses.

Number one is complicated and merits a call to your tax advisor. The current mileage rate is 53.5 cents per mile for 2017 (54 cents per mile for 2016). Or, to track actual expenses, keep a log of oil changes, repairs and maintenance, gas, and so on. Note that ordinary trips to and from your office don’t apply for standard mileage rates, but trips to other offices or business meetings do.

Utilities

Keep a record of your dental practice’s water, electric, gas, phone, internet, rent and/or mortgage payments.

Employee salaries, healthcare, and retirement accounts

You probably already know you can deduct the employer’s contributions to retirement and healthcare accounts. But you might not be aware of the recent change allowing employer-funded health savings accounts, or that your spouse can earn a salary that can also save money on taxes (there are many ways to do this; call our office for more information).

Read our blog post on Tax Savings for Dentists for more information.

Advertising and marketing

The cost of promoting your dental practice is tax deductible. So take out that ad in the local business journal, and send those mailers. Then include the fees on your taxes.

Legal and Tax Fees

Finally, you can deduct the cost of your attorney and tax professional. We can show you how – contact us today!

Can Dentist Deduct the Cost of Washer and Dryer?

I was wondering if a washer and dryer is a deductible expense.  I work as an associate as an employee, as well as working at a nursing home once a week as a sole proprietor.

A practice that purchases a washer and dryer to have in their office for cleaning staff laundry is certainly deductible.

If you're asking about a washer and dryer that you use at home for ALL your clothes that might include a few uniforms each week, that would not be deductible in my opinion. 

Sorry.

This first appeared on Dentaltown.

For more information, please contact info@dentalcpas.com

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What Meals and Entertainment Deductions Can a Dentist Take?

I've read that this category (meals and entertainment deductions) is highly scrutinized by the IRS, so I want to get it right. There are two types of meals and entertainment deductions: 50% and 100%.

I have a monthly meeting with my whole staff at a restaurant: 100%
I have a monthly meeting with my whole staff at the office, delivered meal: 100%
I go to my monthly dental society dinner meeting: 100%.

Q.1: I meet my dental, medical friends out at a restaurant/bar, have drinks and eats to discuss our various taxations, and buy some food and drink. The entire encounter is documented as a professional meeting: 50% or 100%???

Q.2: My wife is my designated "office manager," and legitimately handles the ordering of supplies, the paying of the bills, the order and cleanliness of the office, as well as the payroll and certainly future planning. When I go out to dinner with her, we always talk business. If I keep the record of the meeting, (a) how often can we reasonably go out to discuss these issues and have a deduction, and (b) are these 100% meals and entertainment deductions, or 50%? Is there a specific trigger of either documentation or inclusion of all employees?

Thanks.

Here's how I've always discussed it with my dental clients as the way to deciding. It is not stated like this in the code, just a common sense way think about it:

When the meal is incidental to the meeting, the meal is a meeting expense and 100% deductible.

If the meeting is incidental to the meal, it's meals and entertainment, 50% deductible. So you plan on having "dinner" with colleagues and you happen to discuss business, that's a meal. Maybe it's not even deductible?

Another way to think about "dinners":

Everyone has to eat, personal meals are not deductible. If you decide to go out to dinner with your wife, whether she's an employee or not, it's a meal, NOT a meeting. Now, that meal MIGHT be a business meal if you also "intend" to discuss business, that's up to you. Make sure you document the topics and even include any follow-up actions required. For example, if you discussed an employee’s job performance, make sure one of you has a meeting with that employee within a couple of days to go over the issues and place that with the meal receipt.

Documentation the key.

This won't guarantee you that an agent won't ask about it or argue with you on its deductibility; however, you have enough "substantiation" to make a solid argument in my opinion.

Let's just say, for argument's sake, you don't have documentation...what happens?If audited they'll disallow the deduction.

What if other meals of a business nature are coded as "entertainment" and not documented at all?Same as above....most of my clients have excellent memories though.....if audited they always seem to remember who they were with, how they relate to the practice and the topics discussed... 

What about a study club? I also wonder where that falls.

True study club meal? Totally deductible, no question about it. Some of the study clubs I've spoken at have a set price for the dinner and they offer a choice of selected appetizers, main courses and deserts and the club builds that into the cost of the monthly meeting or dues for that month so there's no "meal" that the individual pays for, the cost is to attend the meeting and the meeting provides food. No different than attending a full day CE course at a hotel conf room and they provide lunch. Do they break out the price of the lunch from the cost of the CE? Absolutely not.

Now, if one wants to have "drinks" with a few selected colleagues to discuss one of their cases and call it a study club, just remember, who's the expense going to? The study club or the restaurant? When audited you can call it whatever you want, just be prepared to have it questioned and be prepared to support your position. Worst case is they disallow it and you'll owe a few bucks.

By the way, there's nothing in the tax code that PROHIBITS a taxpayer from arranging their affairs around business meetings. It DOES prohibit one from trying to deduct a personal expense. If you know the rules, then you know how to arrange your affairs to meet the rules. If it meets the rules, it's deductible and can't be disallowed.

I don't mean to make it sound so simple; it certainly takes a little effort to abide by the rules in some situations, however, that little effort can generate a 40% discount!

This originally appeared on Dentaltown.

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What Dental Expenses Can Be Deducted?

If I paid for CE in 2011 that I am going to actually take in 2012, do I deduct it out of my 2011 taxes or my 2012 taxes?  I also paid for 2012 membership dues in AGD in 2011, which tax year would that deduction fall under?

You're a cash basis tax payer so generally you deduct your expenses in the year you paid them.

Also, when attending CE, what can you deduct?  Flight, food, etc? Or just the cost of the course?
Yes of course, travel like air-fare, train-fare, rental car, lodging, taxis, tips, meals while traveling for business, etc.

When I was looking for employment last year, can I deduct flights/car rentals used to travel to where I now work for interviews?
Job hunting expenses are deductible.

Can I deduct any of: DEA, licensing, board fees if I just graduated and they are NOT renewals?
Generally, yes.

I am not receiving ANY benefits and am paying for health, life, malpractice, disability insurance all on my own.  Is any of that deductible for 2011 or 2012?
Yes, some of it is: malpractice as a business expense, health as medical expense.

I am still looking for a CPA, so I only have all of your wealth of knowledge to fall back on right now...

Please advise.

Get a CPA NOW!

Thank you.

This first appeared on Dentaltown. 

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