Chairside Advisors
Book a call
Chairside Advisors
Client loginBook a call
← All resources

The complete tax guide for dental practice owners (2026)

Jacob Lee · October 3, 2026 · 28 min read

Why Tax Planning Is One of Your Biggest Profit Levers

For a profitable dental practice owner, proactive tax planning can be worth tens of thousands of dollars a year, often more than a fee increase or a new marketing campaign. Yet many dentists only think about taxes once a year, when it's too late to change the outcome.

The 2025 One Big Beautiful Bill Act (OBBBA) also reshaped the landscape, making 100% bonus depreciation, a much larger Section 179 limit, and the qualified business income (QBI) deduction permanent, and raising the SALT deduction cap.

This guide is organized the way your tax life actually works:

This article is for educational purposes only and isn't tax or legal advice. Every practice's situation is different, so review any strategy with a qualified CPA before acting.

2026 Key Tax Numbers at a Glance

These are the federal limits dental practice owners reference most often for the 2026 tax year.

Item 2026 limit
401(k) employee deferral $24,500
401(k) catch-up, age 50+ $8,000 (ages 60 to 63: $11,250)
Total defined contribution limit (employee + employer) $72,000, plus catch-up
Maximum compensation counted for retirement plans $360,000
Defined benefit plan maximum annual benefit $290,000
HSA contribution $4,400 self-only, $8,750 family, plus $1,000 at 55+
Social Security wage base $184,500
Section 179 expensing limit $2,560,000, phasing out above $4,090,000 of purchases
Bonus depreciation 100%, permanent for property acquired after January 19, 2025
SALT deduction cap About $40,400, phasing down above roughly $505,000 of MAGI
QBI deduction phase-out for service businesses Begins around $200,000 single and $400,000 joint taxable income
Business standard mileage rate 72.5 cents per mile January to June; 76 cents from July 1
Form 1099-NEC reporting threshold $2,000 for payments made in 2026

Part 1: Entity and Corporate Structuring

Your entity choice decides how much of your profit is hit by payroll taxes, how flexible your retirement planning can be, and how a future sale will be taxed. Get this right first, because every other strategy builds on it.

Your entity options compared

Structure How profit is taxed Payroll (self-employment) tax Best for
Sole proprietorship or single-member LLC Flows to your personal return On nearly all profit New or lower-income practices
LLC taxed as a partnership Flows to each owner's return On nearly all profit for active owners Multi-owner practices wanting flexibility
S corporation (or LLC electing S corp status) Flows to your personal return Only on the W-2 salary you pay yourself Profitable owners, commonly above roughly $250,000 of net income
C corporation 21% at the company level, then taxed again as dividends On salary only Rarely a fit for a typical dental practice
Hybrid: partnership LLC owned by personal S corps Flows through each doctor's S corp Only on each doctor's salary Multi-doctor practices and partnerships

The S corporation election

With an S corp, you pay income tax on all profit, but Social Security and Medicare apply only to your salary, not to distributions above it. For a profitable dentist, that can save five figures a year. The election does add costs: a separate payroll, a business tax return, state fees and stricter bookkeeping. Some states and cities also tax S corps directly, so run the numbers for your state before electing.

How to read the worked examples in this guide: each one uses 2026 federal figures, a single filer unless noted, and round numbers to show the method. Real returns include state taxes, phase-outs and other details, so treat these as illustrations, not projections.

Worked Example 1.1: Sole proprietor vs. S corporation payroll tax

Given: Dr. Patel's practice nets $400,000 a year. As an S corp, she would pay herself a $180,000 salary and take the remaining $220,000 as distributions.

Step 1. Payroll tax as a sole proprietor. Self-employment tax applies to 92.35% of net earnings.

Calculation Amount
Net earnings subject to SE tax: $400,000 × 92.35% $369,400
Social Security: 12.4% × $184,500 wage base $22,878
Medicare: 2.9% × $369,400 $10,713
Additional Medicare: 0.9% × ($369,400 − $200,000) $1,525
Total payroll tax $35,116

Step 2. Payroll tax as an S corp. Employer and employee FICA apply only to the $180,000 salary.

Calculation Amount
Social Security: 12.4% × $180,000 $22,320
Medicare: 2.9% × $180,000 $5,220
Additional Medicare (salary is under $200,000) $0
Total payroll tax $27,540

Step 3. Net savings. $35,116 − $27,540 = $7,576 in gross payroll tax savings. Subtract roughly $2,500 to $4,000 a year in added payroll, tax return and state costs, and Dr. Patel nets about $3,500 to $5,000 a year.

Takeaway: Once income is well above the Social Security wage base, most of the S corp savings comes from Medicare tax on distributions. The election still pays, but the margin is narrower than many dentists expect, which is why the math should be run for your exact numbers and state.

Hybrid structures for partnerships

In multi-doctor practices, many dental CPAs recommend keeping the practice as an LLC taxed as a partnership, with each doctor owning their share through a personal S corp. Each doctor can then set their own salary, retirement contributions and benefits without forcing the same choices on partners.

Separate entities for real estate and management

Many owners hold their building in a separate LLC that leases space to the practice. This protects the real estate from practice liabilities, can create rental income that isn't subject to payroll tax, and makes it easier to sell the practice while keeping the building. Larger groups may also separate a management company from the clinical entity, though state rules on dental ownership must be followed.

Common structuring mistakes

  • Electing S corp status too early, when savings don't cover the added costs
  • Never revisiting the structure as income, partners or state laws change
  • Owning the building inside the practice entity
  • Partnerships without a written operating agreement covering buy-ins, buyouts and disability

Part 2: Paying Yourself the Right Way

How you split your income between salary and distributions affects payroll taxes, retirement contributions and audit risk all at once.

Reasonable compensation

The IRS requires S corp owners to pay themselves reasonable compensation for the work they do, but it doesn't set a number. A practical benchmark is what you'd earn as an associate in your market, adjusted for your production and management duties. Document how you arrived at the figure, since an unusually low salary paired with large distributions is a common audit trigger.

Balancing salary against retirement goals

A higher salary costs more in payroll taxes, but it can also increase how much you're allowed to contribute to certain retirement plans. For example, employer profit sharing contributions are based on W-2 wages, and cash balance plan contributions depend on compensation. The right salary is the one that optimizes payroll tax and retirement savings together, so set them in the same conversation with your CPA.

Worked Example 2.1: Does a higher salary pay for itself through retirement contributions?

Given: Dr. Patel's S corp offers a 401(k) with profit sharing. Employer profit sharing can be up to 25% of W-2 salary, and the total per person is capped at $72,000. She's in the 35% federal bracket and compares a $150,000 salary with a $180,000 salary.

Step 1. Maximum contributions at each salary.

$150,000 salary $180,000 salary
Employee deferral $24,500 $24,500
Profit sharing: 25% × salary $37,500 $45,000
Total contribution $62,000 $69,500

Step 2. Cost of the extra $30,000 of salary. Both salaries are under the $184,500 wage base, so the full 15.3% FICA applies: $30,000 × 15.3% = $4,590.

Step 3. Benefit of the extra contribution. The added $7,500 of profit sharing is deductible: $7,500 × 35% = $2,625 in income tax deferred.

Step 4. Compare. $4,590 in permanent payroll tax vs. $2,625 in deferred income tax. Even after the deduction for the employer half of FICA, the higher salary costs more than it saves.

Takeaway: With a standard 401(k) and profit sharing plan, raising salary just to unlock more profit sharing usually doesn't pay. The answer can flip when a cash balance plan is added, because those contributions are often driven by compensation, which is why salary and plan design must be modeled together.

Social Security wage base

Social Security tax applies only up to $184,500 of wages in 2026, while the 2.9% Medicare tax applies to all wages, plus an additional 0.9% above $200,000 (single) or $250,000 (joint). Once your salary passes the wage base, the payroll tax cost of each additional salary dollar drops sharply.

Taking distributions

S corp distributions aren't subject to payroll tax, but they reduce your basis and must be proportional to ownership if there are multiple shareholders. Unequal distributions can jeopardize the S election, which is another reason partnerships often use the hybrid structure.

Part 3: Retirement and Benefit Plans

Retirement plans are usually the single largest deduction available to a practice owner, and the right design can shelter well into six figures a year.

Retirement plan options compared

Plan 2026 owner contribution potential Best for Watch out for
SEP IRA Up to $72,000 Solo or very small practices Must contribute the same percentage for eligible staff
SIMPLE IRA $17,000 deferral plus a small employer match Small practices wanting low cost Low limits for high earners
401(k) with profit sharing Up to $72,000, plus $8,000 catch-up at 50+ Most practice owners with staff Annual testing; safe harbor design avoids most issues
Cash balance (defined benefit) plan Often $200,000 to $300,000+ per year, depending on age and pay Highly profitable, stable owners, especially in their late 40s and up Required annual funding, actuary fees, staff contributions
401(k) + profit sharing + cash balance combo Total can exceed $300,000 for older owners Peak-earning owners planning for retirement Needs consistent cash flow for years

Choosing the right plan

A safe harbor 401(k) with profit sharing is the sweet spot for most owners. It allows high contributions while avoiding most nondiscrimination testing problems. Layering a cash balance plan on top works best when profits are stable and high, because contributions are a multi-year commitment, not a one-time decision in a strong year.

Worked Example 3.1: Adding a cash balance plan

Given: Dr. Morgan is 57, files jointly, and her practice consistently nets $700,000. She's in the 37% federal bracket and pays 5% state tax, for a combined 42% marginal rate. Her actuary designs a combination plan. (Actual contribution amounts depend on age, pay and plan design; these are illustrative.)

Step 1. Total contributions for Dr. Morgan.

Contribution Amount
401(k) deferral $24,500
Catch-up (age 50+) $8,000
Profit sharing: 6% × $360,000 compensation limit $21,600
Cash balance contribution set by actuary $200,000
Total tax-deferred contributions $254,100

Step 2. Tax deferred this year. $254,100 × 42% = $106,722

Step 3. Cost of staff contributions. Suppose the plan requires $18,000 in contributions for eligible staff. Those are deductible, so the after-tax cost is $18,000 × (1 − 42%) = $10,440.

Step 4. Net first-year benefit. $106,722 − $10,440 = about $96,000 in taxes deferred, after staff costs and before actuary fees.

Takeaway: For high-earning owners in their 50s, a cash balance plan can defer more tax than any other single strategy. The catch is that the $200,000 is an expected yearly commitment, so a down year can strain cash flow.

Health and fringe benefits

  • Health insurance for S corp owners. Premiums paid for a more-than-2% shareholder are added to W-2 wages and can then be deducted on your personal return as self-employed health insurance.
  • Health savings accounts. With a high-deductible plan, you can contribute up to $4,400 self-only or $8,750 family in 2026. HSAs are triple tax-advantaged: deductible going in, tax-free growth, and tax-free for medical expenses.
  • Other benefits. Disability insurance, group term life, dependent care assistance and continuing education reimbursement can all be structured tax-efficiently for owners and staff.

Part 4: Deductions You Can Claim Every Year

These are the recurring deductions and rules to review every time you file. Individually they look small, but together they often add up to thousands of dollars a year.

Deduction or rule What it covers Key requirement
Ordinary practice expenses Supplies, lab fees, staff wages, rent, insurance, software, marketing, professional dues Ordinary and necessary for the practice
Accountable plan reimbursements Tax-free reimbursement of business costs you pay personally Written plan, receipts, timely reimbursement
Home office A dedicated space used regularly and exclusively for practice administration Exclusive use; reimbursed through an accountable plan for S corp owners
Vehicle use Business miles for CE, supply runs, multiple locations, bank trips Mileage log; commuting doesn't count
Continuing education and travel Courses, study clubs, conferences, and related travel and lodging Must maintain or improve your current skills
Phones, internet and technology Business share of mixed-use services and devices Reasonable business-use percentage
Business meals 50% of meals with a clear business purpose Documented attendees and purpose
Hiring family members Wages to a spouse or children for real work Fair pay, real duties, time records
De minimis safe harbor Expense items costing $2,500 or less per invoice or item instead of depreciating them Annual election with your return
QBI deduction (Section 199A) Up to 20% of qualified business income Phases out for dental practices above roughly $200,000 single and $400,000 joint taxable income
Startup and organization costs Up to $5,000 each deducted in year one for a new practice or location Remainder amortized over 15 years
Bad debts and write-offs Uncollectible patient balances, for accrual-basis practices Cash-basis practices generally can't deduct them

The QBI deduction for dentists

Dental practices are treated as specified service businesses, so the 20% QBI deduction phases out once taxable income passes roughly $200,000 (single) or $400,000 (joint) in 2026. OBBBA made the deduction permanent and widened the phase-in range. Owners near the threshold can sometimes preserve part of the deduction by increasing retirement contributions to lower taxable income.

Worked Example 4.1: Calculating the QBI deduction

Given: Dr. and Mr. Lee file jointly. The practice generates $300,000 of qualified business income, and their total taxable income before the QBI deduction is $380,000. They're in the 32% bracket.

Step 1. Check the threshold. $380,000 is below the roughly $400,000 joint threshold, so the specified service limitation doesn't apply yet.

Step 2. Calculate the deduction. It's the lesser of two amounts:

Test Calculation Result
20% of QBI 20% × $300,000 $60,000
20% of taxable income 20% × $380,000 $76,000
Deduction (lesser of the two) $60,000

Step 3. Tax savings. $60,000 × 32% = $19,200

Variation: If their taxable income were $430,000, the deduction would start phasing down. Adding $30,000 of 401(k) deferrals for the couple would bring taxable income back to about $400,000 and protect most or all of the deduction, so the deferral saves tax twice: once on the contribution and again by preserving QBI.

The accountable plan

If you're an S corp owner, an accountable plan is the cleanest way to deduct home office, phone, mileage and other mixed-use costs. The practice reimburses you, the reimbursement is tax-free to you, and the practice deducts the expense. Without one, many of these costs can't be deducted at all.

Worked Example 4.2: What an accountable plan is worth

Given: Dr. Patel, an S corp owner in the 35% bracket, uses a 200-square-foot room of her 2,000-square-foot home exclusively for practice administration. Annual home costs (mortgage interest, utilities, insurance, repairs) total $30,000. She drives 4,000 business miles, split evenly between the first and second half of 2026, and her $1,800 phone bill is 60% business use.

Expense Calculation Reimbursement
Home office (200 ÷ 2,000) × $30,000 $3,000
Mileage, January to June 2,000 miles × $0.725 $1,450
Mileage, July to December 2,000 miles × $0.76 $1,520
Phone 60% × $1,800 $1,080
Total tax-free reimbursement $7,050

Tax savings: The practice deducts $7,050, and Dr. Patel receives it tax-free: $7,050 × 35% = about $2,468 in income tax. If she had taken the same money as extra salary instead, she'd also have owed payroll tax on it.

Family employment

Paying your spouse or children for legitimate work, such as bookkeeping, filing, cleaning or social media, shifts income to lower tax brackets. Wages paid to your own children under 18 by a sole proprietorship or a partnership owned only by the parents are also exempt from Social Security and Medicare tax. That exemption doesn't apply when the practice is an S corp, so check your structure.

Worked Example 4.3: Hiring your teenager

Given: Dr. Lee co-owns her practice with her husband as a partnership, with no S corp. They hire their 16-year-old son to scan records and manage social media, paying him $14,000 for documented work. The Lees are in the 35% bracket.

Effect Calculation Result
Parents' federal income tax saved $14,000 × 35% $4,900
Son's federal income tax Wages fall under his standard deduction $0
Social Security and Medicare on son's wages Exempt: child under 18 employed by a parent-owned partnership $0
Net family tax savings About $4,900, plus a small reduction in the parents' self-employment tax

Bonus: Because the son has earned income, he can contribute to a Roth IRA, letting that money grow tax-free for decades.

Part 5: Equipment, Technology and Buildouts

Dentistry is equipment-heavy, which makes depreciation one of the most powerful levers you have. Under current law, most practices can deduct the full cost of new equipment in the year it's placed in service.

Section 179 vs. bonus depreciation

Section 179 Bonus depreciation
2026 limit $2,560,000, phasing out above $4,090,000 of purchases No dollar limit; 100% for property acquired after January 19, 2025
Can it create a loss? No, limited to business taxable income Yes
Flexibility Choose asset by asset how much to expense Applies to an entire asset class unless you opt out
State conformity Many states follow it, some with lower limits Many states don't follow it
Used equipment Qualifies Qualifies if it's new to you

Rules that make or break the deduction

  • Placed in service by December 31. Equipment must be installed and ready to use, not just ordered or paid for.
  • Financed equipment counts. You can deduct the full cost even if you're paying for it over several years.
  • Watch your state. If your state doesn't conform, you may have a large federal deduction but still owe state tax on that income.
  • Don't buy just for the deduction. A deduction saves a percentage of the cost; it doesn't make an unnecessary purchase free.

Worked Example 5.1: Financing a CBCT and expensing it in year one

Given: Dr. Morgan buys a $120,000 CBCT unit, finances 100% over five years at about $2,400 a month, and it's installed and in use on December 15, 2026. She's in the 37% federal bracket and elects Section 179.

Step 1. First-year deduction. The full $120,000 is deductible in 2026, even though she has paid almost nothing yet.

Step 2. First-year tax savings. $120,000 × 37% = $44,400

Step 3. First-year cash flow.

Item Amount
Federal tax savings +$44,400
Loan payments in 2026 (one payment) −$2,400
Net 2026 cash flow effect +$42,000

Step 4. The true after-tax cost. $120,000 × (1 − 37%) = $75,600. The deduction lowers the cost; it doesn't make the scanner free.

Timing check: If installation slipped to January 5, 2027, the entire deduction would move to the 2027 return. In future years there's also no remaining depreciation on the unit, so taxable income will be slightly higher than if it had been depreciated over time.

Buildouts and remodels

For a buildout or new operatories, have your CPA break costs into categories instead of booking one lump sum. Dental chairs, imaging, cabinetry and many interior improvements can qualify for faster write-offs than the building shell. Qualified improvement property, meaning interior improvements to nonresidential buildings, generally qualifies for bonus depreciation as well.

Vehicles

Heavy SUVs and trucks over 6,000 pounds gross vehicle weight used more than 50% for business can qualify for much larger first-year deductions than passenger cars, though Section 179 for SUVs is capped. Lighter vehicles face annual depreciation caps. Either way, keep a mileage log, since business use percentage drives the deduction.

Part 6: Real Estate Strategies

Owning your building can turn rent into equity and open up tax strategies renters don't have.

  • Separate real estate LLC. Hold the building in its own entity and lease it to the practice at fair market rent. The practice deducts the rent, and you receive rental income that isn't subject to payroll tax.
  • Depreciation. Commercial buildings depreciate over 39 years, which offsets rental income every year.
  • Cost segregation. An engineering-based study reclassifies parts of a building, such as specialized plumbing, electrical, flooring and site improvements, into 5, 7 and 15 year property. Combined with 100% bonus depreciation, this can create a large first-year deduction. It's most valuable for buildings or major remodels worth several hundred thousand dollars or more.
  • Self-rental rules. Rental income from your own practice is generally treated as non-passive, so it can't be offset by passive losses from other investments. Plan for this before buying.
  • 1031 exchanges. When you sell the building, you can defer capital gains by reinvesting in another investment property through a like-kind exchange.
  • Keep the building when you sell. Many dentists sell the practice but keep the real estate, collecting rent from the buyer or DSO as long-term retirement income.

Worked Example 6.1: Cost segregation on a dental building

Given: Dr. Lee's real estate LLC buys a dental building for $1,500,000. The land is valued at $300,000, which can't be depreciated. A cost segregation study finds that 25% of the building cost is 5, 7 or 15 year property eligible for 100% bonus depreciation. She's in the 37% bracket. (Mid-month conventions are ignored to keep the math simple.)

Step 1. Depreciable basis. $1,500,000 − $300,000 land = $1,200,000

Step 2. Year-one depreciation without cost segregation.

Calculation Amount
$1,200,000 ÷ 39 years $30,769

Step 3. Year-one depreciation with cost segregation.

Component Calculation Amount
Short-life property with bonus 25% × $1,200,000 $300,000
Remaining building ($1,200,000 − $300,000) ÷ 39 $23,077
Total year-one depreciation $323,077

Step 4. Additional deduction and tax value. $323,077 − $30,769 = $292,308 in extra year-one depreciation. At 37%, that's worth up to $108,154, before the study fee.

Caution: Because this is a self-rental, the deduction mainly offsets rental income from the practice, and excess losses may be limited. Accelerated depreciation is also recaptured when the building is sold, so this is primarily a timing benefit.

Part 7: Tax Credits Dental Practices Often Miss

Credits are more valuable than deductions because they reduce your tax bill dollar for dollar. Several apply directly to dental practices.

Credit What it rewards Typical value
Disabled access credit (Section 44) Improvements and equipment that make the practice accessible, such as ramps, accessible operatories, door widening, or hearing and visual aids 50% of eligible costs between $250 and $10,250, up to $5,000 a year, for practices with $1 million or less in gross receipts or 30 or fewer full-time employees
Retirement plan startup credit Setting up a new 401(k), SEP or SIMPLE plan Up to $5,000 a year for three years toward setup costs for small employers, plus potential credits for employer contributions and a $500 auto-enrollment credit
Employer-provided childcare credit (Section 45F) Providing or paying for childcare for employees Expanded by OBBBA starting in 2026, with higher percentages and caps for small businesses
Paid family and medical leave credit (Section 45S) Offering paid family and medical leave to eligible employees A percentage of wages paid during leave; made permanent by OBBBA
Research and development credit Developing new or improved techniques, processes or software Varies; rarely applies to routine dentistry, but may fit practices developing proprietary workflows or technology

The disabled access credit can be claimed every year you make qualifying improvements, and it can be combined with depreciation on the remaining cost. Ask your CPA to review accessibility upgrades and new equipment purchases against it annually.

Worked Example 7.1: The disabled access credit

Given: Dr. Patel's practice has $950,000 in gross receipts, so it qualifies as an eligible small business. She spends $6,000 widening a doorway and adding an accessible operatory chair. She's in the 35% bracket.

Step 1. Calculate the credit. The credit is 50% of eligible costs above $250, with eligible costs capped at $10,250.

Calculation Amount
Eligible costs above the $250 floor: $6,000 − $250 $5,750
Credit: 50% × $5,750 $2,875

Step 2. Deduct the rest. The portion not covered by the credit can still be deducted or depreciated: $6,000 − $2,875 = $3,125. At 35%: $3,125 × 35% = $1,094.

Step 3. Total tax benefit. $2,875 + $1,094 = $3,969, or about 66% of the project's cost.

Maximum case: Spending $10,250 produces the maximum credit: 50% × ($10,250 − $250) = $5,000.

Part 8: State Taxes and the SALT Workaround

For high-earning dentists in states with income tax, the pass-through entity tax (PTET) election is one of the most valuable annual decisions.

How the PTET election works

The federal deduction for state and local taxes (SALT) is capped at about $40,400 for 2026, and that cap phases down for incomes above roughly $505,000 of modified adjusted gross income, never falling below $10,000. Many successful dentists hit that phase-down, which means much of their state income tax isn't deductible federally.

Most states with an income tax now let S corps and partnerships pay state tax at the entity level. The entity deducts that tax as a business expense on the federal return, which isn't subject to the SALT cap, and owners generally receive a credit on their personal state return.

Worked Example 8.1: The PTET election

Given: Dr. and Mr. Lee file jointly with $600,000 of modified adjusted gross income (MAGI), all from their S corp practice. Their state taxes the income at 6%, they pay $12,000 in property tax, they itemize, and they're in the 37% bracket. The 2026 SALT cap is about $40,400, reduced by 30% of MAGI above roughly $505,000, but never below $10,000.

Step 1. Without the PTET election.

Calculation Amount
State income tax: 6% × $600,000 $36,000
Property tax $12,000
Total SALT paid $48,000
SALT cap: $40,400 − 30% × ($600,000 − $505,000) $11,900
Deductible SALT $11,900

Step 2. With the PTET election. The S corp pays the $36,000 of state tax and deducts it as a business expense, which lowers MAGI to $564,000.

Calculation Amount
Business deduction for PTET $36,000
New SALT cap: $40,400 − 30% × ($564,000 − $505,000) $22,700
Property tax, now fully under the cap $12,000
Total deductible state and local taxes $48,000

Step 3. Federal tax savings. ($48,000 − $11,900) × 37% = $36,100 × 37% = $13,357 a year.

Takeaway: For high earners in income-tax states, the PTET election can be worth five figures every year, but state rules on deadlines and credits vary, so confirm how your state handles it.

Things to know

  • Rules, deadlines and credits vary widely by state, and some elections must be made early in the year.
  • Estimated payments may need to be made by the entity rather than personally.
  • Owners who are under the SALT cap or living in a different state than the practice need individual analysis.
  • State conformity to federal depreciation rules varies, so a federal deduction may not reduce state tax the same way.

Part 9: A Year-Round Tax Calendar for Dental Practices

The best tax outcomes come from decisions made during the year, not at filing time. Use this calendar as a starting point and confirm exact dates with your CPA, since deadlines shift when they fall on weekends or holidays.

When What to do
January Issue W-2s and 1099s by January 31; pay the fourth-quarter estimated tax by mid-January; review last year's results
February to March File S corp and partnership returns or extensions by March 15; make a new S corp election by March 15 to apply for the current year
April File personal returns or extensions; pay first-quarter estimates; make prior-year IRA and HSA contributions
June Pay second-quarter estimates; run a mid-year profit and tax projection
September Pay third-quarter estimates; file extended business returns by September 15; adopt any new safe harbor 401(k) plan by October 1
October to November Year-end tax projection; set final owner salary; plan equipment purchases, retirement contributions and PTET payments
December Place equipment in service by December 31; pay deductible expenses; make required payroll-based retirement deferrals
By your filing deadline, including extensions Fund employer profit sharing and cash balance contributions; adopt a new profit sharing or cash balance plan for the prior year

Part 10: Buying, Selling and Exit Planning

The tax impact of a practice sale is decided years before the deal, by how the practice is structured and how the purchase price is allocated.

Asset sale vs. equity sale

Most dental practice sales are asset sales. Buyers prefer them because they can depreciate or amortize what they buy. Sellers often prefer equity sales because more of the gain may qualify for capital gains rates. Your entity type also matters: for example, owners who converted from a C corp to an S corp may face built-in gains tax if they sell within the recognition period.

Purchase price allocation

In an asset sale, the price is divided among categories, each taxed differently:

Asset category Seller's tax treatment Buyer's tax treatment
Goodwill (patient base, reputation) Generally long-term capital gain Amortized over 15 years
Equipment and furniture Depreciation recaptured as ordinary income, with any excess as capital gain Can often be expensed or depreciated quickly
Supplies and inventory Ordinary income Deducted as used
Non-compete agreement Ordinary income Amortized over 15 years
Consulting or employment agreement Ordinary income, plus payroll tax for employment pay Deducted as paid

Buyers and sellers usually want opposite allocations, so negotiate the allocation as part of the deal, not after.

Worked Example 10.1: How allocation changes the seller's tax bill

Given: Dr. Morgan sells her practice in an asset sale for $1,000,000. Her equipment is fully depreciated. Long-term capital gains are taxed at 20% and ordinary income at 37%. The buyer proposes shifting $100,000 from goodwill to a non-compete agreement. (State tax and the net investment income tax are ignored for simplicity.)

Asset Seller-friendly allocation Tax Buyer's proposed allocation Tax
Goodwill (20% capital gain) $850,000 $170,000 $750,000 $150,000
Equipment (37% ordinary, depreciation recapture) $100,000 $37,000 $100,000 $37,000
Non-compete (37% ordinary) $50,000 $18,500 $150,000 $55,500
Total $1,000,000 $225,500 $1,000,000 $242,500

Result: The same $1,000,000 price costs Dr. Morgan $17,000 more in tax under the buyer's allocation, because $100,000 moves from a 20% rate to a 37% rate.

Takeaway: Negotiate the allocation alongside the price. A slightly lower price with a better allocation can leave you with more after tax.

DSO sales and rolled equity

In many DSO deals, part of your value is rolled into equity in the DSO. When properly structured, that rollover may be tax-deferred until the equity is later sold, while the cash at closing is taxed now. Earnouts and holdbacks can also shift when income is recognized. These terms deserve tax modeling before you sign a letter of intent.

Other exit planning tools

  • Installment sales can spread gain over several years when part of the price is paid over time.
  • Keeping the real estate gives you ongoing rental income after the sale.
  • Charitable strategies, such as donor-advised funds or charitable remainder trusts, can offset income in a high-income sale year.
  • Maximizing retirement contributions in the years before a sale lowers taxable income when rates may be highest.

Dental-Focused CPA vs. Generic CPA: What to Expect

A generic CPA can file an accurate return; a dental CPA compares your practice to hundreds of others and plans ahead with that context. Both are licensed professionals, but the depth of advice you get differs sharply.

Area Generic CPA Dental-focused CPA
Tax approach Mostly reactive, focused on accurate year-end filing Proactive, year-round planning with projections before December 31
Industry benchmarks Few or no dental clients to compare against Benchmarks overhead, staff costs, supplies and lab fees against many dental practices
Reading your numbers Sees line items, like rising wages Explains the why, such as hygiene wages rising while clinical wages stay flat
Retirement plans Often defaults to a basic 401(k) or SEP Designs 401(k), profit sharing and cash balance combinations around dental cash flow
Equipment and buildouts Records purchases as booked Times purchases and breaks out buildout costs to maximize first-year deductions
Entity structure Standard S corp or LLC setup Structures for multi-doctor partnerships, associate buy-ins and future sales
Practice reports Rarely uses PMS production or collections data Understands production reports, collections ratios and A/R
Buying or selling Handles the tax return after the deal Advises on valuation, deal structure, price allocation and DSO offers
Investment decisions May discourage spending if the deduction isn't needed Weighs the ROI of dental-specific investments, not just the tax effect

A simple first test: ask your current CPA how many dental practices they serve. If the answer is one or two, they likely can't tell you how your practice stacks up.

Questions to Ask Before Hiring a CPA

  1. How many dental practices do you currently serve, and what share of your client base are dentists?
  2. How do you benchmark my overhead and profitability against other dental practices?
  3. When do we meet for tax planning, and how often during the year?
  4. Will you give me a tax projection before year-end, not just a return after it?
  5. How do you set reasonable compensation for S corp owners?
  6. Have you designed cash balance or combination retirement plans for dentists?
  7. Have you advised clients through practice purchases, partnerships or DSO sales?
  8. Can you read and use reports from my practice management software?
  9. Who on your team will actually work on my account?
  10. What's included in your fee, and what costs extra?

Where a Fractional CFO Fits Alongside Your CPA

Your CPA minimizes the taxes you owe; a fractional CFO makes sure you have the cash flow and profitability to use those strategies well. Tax planning is a subset of cash flow planning. A cash balance plan, a large equipment purchase or a higher S corp salary only works if your practice can fund it year after year.

A dental fractional CFO works alongside your CPA to:

  • Forecast cash flow so retirement contributions, estimated taxes and equipment purchases are funded without strain
  • Track profitability monthly, so your CPA plans from current numbers instead of last year's return
  • Benchmark overhead and build a plan to lower costs that are out of line
  • Model big decisions like adding an associate, opening a second location or buying your building, including the tax impact
  • Prepare for a sale by cleaning up financials and documenting add-backs well before a buyer or DSO looks at your books

Want your tax strategy backed by a real financial plan? Schedule a free consultation and we'll show you how your numbers, your CPA and your goals fit together.

Frequently Asked Questions

What is the best business structure for a dental practice?

For most profitable owners, an S corporation, or an LLC electing S corp status, offers the best balance of payroll tax savings and simplicity. Multi-doctor practices often use a partnership LLC owned by each doctor's personal S corp. The right answer depends on your income, state and number of owners.

When should a dentist elect S corp status?

Many dental CPAs cite roughly $250,000 in net income as the point where S corp savings outweigh added payroll and compliance costs. An S corp election generally must be filed by March 15 to apply for the current tax year.

How much can a dentist put into retirement plans in 2026?

A 401(k) with profit sharing allows up to $72,000, plus an $8,000 catch-up at age 50 or older. Adding a cash balance plan can raise total tax-deferred contributions to $200,000 to $300,000 or more a year, depending on age and income.

Can I write off dental equipment in the year I buy it?

In most cases, yes. For 2026, Section 179 allows up to $2,560,000 of first-year expensing, and 100% bonus depreciation is permanent for property acquired after January 19, 2025. Equipment must be placed in service by December 31, and state rules may differ.

Can dentists take the QBI deduction?

Sometimes. Dental practices are specified service businesses, so the 20% QBI deduction phases out once taxable income passes roughly $200,000 single or $400,000 joint in 2026. Retirement contributions can help owners near the threshold keep part of it.

What tax deductions do dentists most often miss?

Commonly missed items include accountable plan reimbursements, home office, business mileage, CE travel, family employment, the de minimis safe harbor, the disabled access credit and cost segregation on owned buildings.

What is reasonable compensation for a dentist S corp owner?

The IRS doesn't set a figure. A common starting point is what you'd earn as an associate in your market, adjusted for your production and management duties. Document how you set it.

Do I really need a dental-specific CPA?

A general CPA can handle compliance, but a dental CPA brings industry benchmarks, retirement plan design experience and transaction expertise that usually lead to better planning.

What's the difference between a dental CPA and a fractional CFO?

A CPA focuses on taxes, compliance and tax strategy. A fractional CFO focuses on cash flow, profitability, forecasting and growth decisions. The two work best together.

Which of these actually apply to your practice?

Most of these strategies only work if your cash flow can fund them year after year. We model them against your own numbers, alongside your CPA, before anything gets filed.

Book a call

Sources

Additional 2026 figures: