5 Ways that Dentists Can Easily Increase Cash Flow and Tax Free Income…Legally!

Posted by POS Course Adviser on 12/13/17 3:29 PM


We asked an advanced tax strategist and CPA accountant, “How can dentists take home more of their income?” Lubna Channo is a bestselling co-author of “You Can Deduct THAT?” She works with many dentists (and is married to one too) so has this expert advice for you to help in your end-of-year planning.

If you own a dental practice and aren't engaging in proactive tax planning and management, you are undoubtedly overpaying Uncle Sam by a considerable degree.

Approximately 75 percent of U.S. dentists own small practices. It has been estimated that the average American dentist pays $125 for every $100 that they are required to pay in taxes. Imagine what you could do if you could slash your tax burden by 25%?

One way to increase cash flow is, of course, to generate more business. But, what if you already run a bustling practice and offer a full range of treatment to your patients? Luckily for you, chances are that you can a keep a lot more of the money that you earn than you suspect. The trick is learning how to increase the amount of income that you make that isn't subject to tax. This can largely be accomplished by being savvy with your deductions. A few excellent ways to increase your tax-free income include:

  • Write Off Your Continuing Education Expenses - Knowledge is priceless…and also can be a tax deduction. Did you know that as a professional business owner, you can write off 100% of your CE each year? So don't forget to write off your tuition and associated travel and lodging for seminars as they are all fully-deductible. An added tip: Although reducing your taxable income with valuable business investments is always helpful, it's especially helpful if you're on the borderline of a higher tax bracket, as a series expense may bump you down to a lower taxable rate.
  • Have Your Practice Pay Your Health Insurance Premiums - Rather than paying your and your family's medical insurance premiums yourself, have them paid for through your practice. By doing it this way, 100-percent of those premiums will be tax-deductible. That is true whether your practice is set up as an S corporation, a C corporation or even if it is unincorporated. Health insurance premiums can be pricey, so this is a great way to make a decent dent in your taxable income.
  • Rent Out Your Home - Instead of holding work-related events in hotel conference rooms, rent out your home or vacation home to your practice. Yes, the rent that's paid by the practice under such circumstances is deductible. Section 280A(g) of the tax code also allows you to collect up to 14 days' worth of rental income on a tax-free basis. In this way, you can benefit on both sides of the equation.
  • Pay Disability Insurance Premiums Yourself - If your practice is set up as a C corporation, you can--and should--pay your disability insurance premiums yourself rather than have the practice pay them. The practice can then reimburse you at the end of the policy year. If you become disabled before then, no reimbursement should be made because the disability proceeds that were received thus far should be tax-free because the premiums have been paid personally. Few dentists realize this, but when it comes to disability insurance premiums--yes, you often CAN deduct them!
  • Get Reimbursed by Practice for All Business ExpensesLeave no stone unturned when looking for deductions that will keep as much of your income tax-free as possible. Make certain that the practice reimburses you for all business expenses that you have covered personally throughout the year, including for advertising and promotion, business car expenses, safe deposit box fees, dues and subscriptions, continuing education and travel and entertainment.

Want to upgrade your equipment and buy or lease a new, 3-D ceph/pano? This year you can deduct the full purchase price of new or used qualifying equipment from your gross income with Section 179 (up to $500,000).


Any time you go to pay for something yourself, ask yourself: Can I deduct it? There is usually a very good chance that you can. Even seemingly minor expenses add up significantly over the course of a year, so be meticulous about keeping records, and make sure that you are reimbursed for every penny that you spend on behalf of your practice.

Have additional questions for a tax specialist? Or have you found an easy tax-saving method that helps you? Write them in the comments below. 

Topics: Economics of Orthodontics, Tips for Success

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