If you’re a dental professional, then you doubtless pay out a lot in taxes every year, and you may be asking yourself if there are any legitimate ways to save on the cost of this. Fortunately, there are several strategies that you can adopt to save money on your taxes legally, and here are the top tax tips:
- Carefully select the most appropriate business entity:
While successful practices operate under multiple entities, making the tax circumstances more complicated, the potential for saving money on your taxes by doing this, far outweigh any complexities.
Income shifting as a tax saving strategy, is an entirely lawful way of reducing your taxable business income as a dental professional and using this strategy the ‘S’ corporation would be classed as your core business, receiving all gross business income. Your ‘C’ corporation would then receive funds from the ‘S’ corporation to cover the costs of such things as advertising, marketing and other management expenses.
- Make the most of all medical benefits:
These are frequently overlooked when it comes to tax saving tips and strategies, and if you register as the sole proprietor of your business, then there are less options for effectively integrating medical benefits into a tax plan than corporate structures.
If your business is registered as a corporation, then by rights you qualify as your own employee and can go on to reap the rewards of medical benefits and make tax savings that if you were a sole proprietor, simply wouldn’t be available to you.
- Choose the most effective retirement plan:
There are many retirement plans available for dental professionals, and choosing the right one can be tricky. You would perhaps be wise to consider a profit sharing plan that offers scope for more flexibility in annual contributions, particularly if you have no employees.
Maintaining a minimum amount of taxable income while making the most of retirement plan contributions, requires a defined benefit plan whereby you will no longer be faced with the $51,000 or $56,500 contribution limits.
- Employ your children
Having your children as employed members of your practice can give dividends in the form of tax reductions, and of course gives your kids the opportiunity to earn a wage that they can put towards furthering their education. Current IRS rules state that any child below the age of 21 is not required to pay unemployement taxes, and those below the age of 18 need not pay payroll taxes, Social Security, Medicare or unemployment taxes.
- Plan for your taxes well in advance:
Tax planning gives you the opportunity to make strategic decisions during active tax years in ways that tax preparation does not. The law gives dental professinals the chance to structure their financial affairs in a way that minimises their tax liability. For the best results, be sure to meet with a tax professional within 90 days of filing so that you can review your tax return for the previous year and make provisions for the current year.
For more detailed advice and guidance as a dental professional, always seek help from a qualified and experienced tax professional, who will give you the most accurate and up to date information that is sure to meet IRS requirements.