Are Dental Lab Fees Deducible?

I'm an associate at an office. I get 40% of collection after lab fees. Can I deduct those lab fees on my tax return? The lab fees never really officially show up on my pay. What do you think?

First, don't assume the owner is deducting the lab expense BEFORE calculating taxes. I have seen situations where the lab was deducted AFTER taxes were calculated, and if that's the case, YES, you can deduct them. However, if that is not the case, you're better off asking the owner to revise his calculations and revise your W-2.
Second, of course the owner is paying 100% of the lab. Then he's withholding 40% of that lab from your check. So in reality, he is now offsetting that expense for 40% of the lab. At the end of the day, he's only deducting 60%.

This first appeared on Dentaltown.

Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com

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Which Dental Associate Collections vs. Lab Fees Scenario is Best?

With all else being equal, what is the better deal for an associate?

A. 30% of collections, no lab fees
B. 33% of collections, 33% of lab fees

In other words, how much (in terms of a %) does no lab fees make a difference? I understand that alot depends on how much you send to the lab, but looking for a ballpark range.


You do need to assume what the typical lab cost is as a % of revenue. If it typically runs 5-8% in a GD practice lets assume 7% as a nice round #. Now we also know the typical GD practice generates 75% of its revenue from dentistry (not hygiene), so lets take a million dollar practice, where $750k is from dentistry. Lab expense would be $70k (7% of $1mill), so 70/750=9.33%.


Now, lets assume you make 30% of collections which are $100,000, you'd make $30,000.


33% of collections is $33,000, however, 33% of your lab (9,330 x 33%)= $3080 and 33,000-3080 = $29,920.


So 30% of collections is better.... in this case - assuming 9.33% lab expense.

How much lab related work will you be doing?

The less lab the more the 33% less 33% lab looks better.


BTW, some also do 100,000-9330=90670x33% = 29,921. Same result, different path, that's all.

This first appeared on Dentaltown.

Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com

For more information or to sign up for our newsletter, please contact arose@dentalcpas.com

Follow us on Twitter, Facebook and Pinterest