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5 Year-End Tax Strategies for Dental Offices in 2021

Business Success for Your Dental Practice – Henry Schein Financial Services

With 2021 coming to a close, it’s time for dental practices to review their tax plan and ensure they are taking advantage of the opportunities available for their dental practice.

Like many other small businesses, dental practices can take advantage of various tax incentives each year to maximize their deductions.


We suggest creating a tax plan for your practice each year – with each decision you make for your practice, from investing in new equipment and technology to remodeling your waiting room or even expanding your location. Each of these decisions can affect the taxes you may owe and each presents avenues to maximize your upcoming tax return, minimize your tax liability, and a way to get the best deduction for your practice. Neither Henry Schein, Inc. nor Henry Schein Financial Services provides tax advice. Please consult with a qualified professional tax advisor for your unique business situation.


Here are some strategies, and questions to consider, to better manage your year-end taxes.


1. Did you purchase new equipment or implement new technology this year?

One of the most common tax strategies that is sometimes overlooked is a Section 179 tax deduction. Section 179** can be used to help lower your taxable income when you purchase and install new equipment, technology, and other qualifying purchases for your practice. In 2021, with Section 179 you can deduct up to $1,050,000 on these investments.

If you are considering purchasing or upgrading equipment and technology this year, and are interested in taking a Section 179 deduction, please be aware you must purchase and place these purchases into services by December 31st, 2021 to be eligible.

Section 179 notes:

  • There is a window where you can take a section 179 deduction – you must take it for the year in which you implemented the qualifying purchase and placed it into service.
  • If you purchased and placed over $3.5 million in equipment, technology, or other upgrades into service this year there are some limitations. If you fall under this category, contact your accountant or financial advisors to best determine your tax planning options.

More resources:


2. Can you accelerate your deductions?

If you know you will have to make certain large purchases in the upcoming year – such as new equipment or a significant amount of supplies, you can prepay these expenses for an accelerated deduction.

Future expenses like these can be prepaid, such as on a business credit card with a no-interest option – so you don’t have to strain your cash flow, as long as they are filed before December 31st. By paying for these expenses this year, you may be able to take advantage of a potential tax write-off this year.


3. Did you purchase, renovate, or remodel your office building? Or purchase commercial real estate?

The decision to purchase or improve your office can not only be a key factor in the success of your practice in the years to come, and it could also be one of the largest tax deductions ever for your practice. Consider a cost segregation study. A cost segregation study may help you reclassify the cost of your office building and shorten the depreciation amount and timeline. Contact your financial advisors to best determine your tax planning options and if cost segregation is the right option for your practice.

What is cost segregation?

Cost segregation is the process of identifying property assets that are grouped with real property assets and separating personal assets for tax reporting purposes. Some of the potential benefits include: maximizing tax savings by adjusting the timing of deductions (as not everything in your practice may have been built at the same time), creating an audit trail/paper trail to help resolve IRS inquires at the earliest stages, and retroactivity – the ability to recapture unrecognized past depreciation.


4. Maximize your Retirement Plan & Health Savings Accounts

Retirement Plan

While investing in your business is almost always a key to success, don’t forget to invest in your retirement as well. If you are deferring wages into a 401(k) plan, consider contributing as much as you can. The maximum amount you can defer to your 401(k) plan for 2021 is $19,500; however, if you’re over the age of 50, you can contribute an additional $6,500, for a total of 26,000. If you don’t have a retirement plan, consider an Individual Retirement Account (IRA). By contributing to an IRA, you could avoid the percentage of investment tax on your investment income. Contact your tax advisor if you have additional retirement account questions.

Health Savings Accounts (HSA)

With an increase in the number of high-deductible health insurance plans in recent years, consider using a health savings account (HSA). These accounts are tax-free and are specifically used for healthcare and medical purchases. In 2021, the maximum amount you can contribute to an HSA is $7,200 for family coverage and $3,600 for self-coverage. Contact your financial advisor if you have additional health savings account questions.


5. Review your charitable purchases

Most business owners know, not only will charitable purchases and donations allow you to donate to a good cause, provide you with goodwill (and possible good PR), but they can help better position you on your tax return. Contact your financial advisor if you have additional questions about your charitable contributions.


Summary:

2021 Year-end tax strategies for dental offices

  1. Take a tax deduction on new equipment and technology purchases
  2. Review your tax deductions on improvements and real estate purchases
  3. Accelerate your deductions
  4. Maximize your retirement and health savings accounts
  5. Review your charitable purchases

Henry Schein Financial Services offers financing* solutions and programs, including for equipment and technology, commercial real estate, as well as offers the Henry Schein Business Credit Card for dentists.


The information contained herein is intended to be informative in nature and is not intended to be a substitute for professional advice. The information was obtained from sources we believe to be reliable but is not guaranteed. Henry Schein does not undertake any obligation to update or revise any statements contained herein, or correct inaccuracies whether as a result of new information, future events, or otherwise. Dental professionals must make their own business decisions and may wish to seek professional advice before acting with regard to the subjects mentioned herein. Nothing contained herein should be treated as legal, business, accounting, international, insurance, tax, or other professional advice

* Rates and programs are subject to change without notice. All transactions are subject to the satisfaction of underwriting guidelines, credit approval by third-party lenders, and documentation requirements, and not all applicants will qualify. Certain other restrictions and additional terms and conditions may apply.

** Neither Henry Schein, Inc. nor Henry Schein Financial Services provides tax advice. Please consult with a qualified professional tax advisor to determine your eligibility for a Section 179 tax deduction. Must purchase and place into service by December 31, 2021.

©2021Henry Schein, Inc. Neither Henry Schein, Inc. nor Henry Schein Financial Services provides financial advice. Please consult your financial advisor. Neither Henry Schein, Inc. nor Henry Schein Financial Services is a bank and neither represents itself as such, nor conducts banking activities. Henry Schein Financial Services may receive a marketing fee from the vendor for products/services purchased. All other trademarks, registered trademarks, and logos are the property of their respective owners.