Dentist Taxes — Stop Overpaying With a Personalized Tax Strategy

Dentist Tax Planning: What Most General CPAs Miss

A dentist filing a return through a generalist CPA usually overpays. The work the general accountant does is correct. The work they do not do, year-round dental tax planning, is what costs the practice money. Section 179 expensing on a $90,000 imaging unit, S-corp reasonable compensation analysis on owner pay, the difference between filing a 1099 and a W-2 for an associate, the Augusta Rule on practice events. None of this happens in April. All of it happens in October, November, and December, with someone who knows dental practice economics.

What Is a Realistic Dentist Tax Burden?

Solo general dentists owning a practice with $800,000 to $1.4 million in collections typically take home $250,000 to $450,000 in net income. Without active tax planning, federal effective rates often run 28 to 33 percent on that income once self-employment tax stacks on. With S-corp election, retirement plan funding, and entity structure done right, that effective rate generally drops 6 to 10 percentage points. The dentist who stops paying $35,000 of unnecessary federal tax annually is not getting a refund. They are working with a dental CPA who plans before December 31.

Should a Dentist Form an S-Corporation?

Most practice-owning dentists earning meaningful net income from a profitable practice benefit from S-corp election. The mechanic is straightforward: the dentist pays themselves a reasonable W-2 salary (subject to payroll tax) and takes the remainder as distributions (not subject to self-employment tax). The reasonable salary threshold for an owner dentist is generally $130,000 to $200,000 depending on production, region, and ADA salary survey data. Get the reasonable comp number right, document the analysis, and the S-corp saves real money. Get it wrong and the IRS reclassifies distributions as wages on audit.

Section 179 and Bonus Depreciation for Dental Equipment

Dental equipment purchases qualify for accelerated depreciation under Section 179 and bonus depreciation. A practice that buys a $90,000 CBCT scanner, $35,000 in chairs, and $15,000 in instruments in the same year can usually deduct the full $140,000 against current-year income. The trade-off is reduced depreciation in future years. The right answer depends on the practice's projected income trajectory. A practice planning to sell in three years uses Section 179 differently than a practice planning to expand.

How Does the Augusta Rule Work for Dental Practices?

The Augusta Rule (Section 280A) allows a dentist who owns both a residence and a practice to rent the residence to the practice for up to 14 days per year for legitimate business use (board meetings, staff retreats, photoshoots). The rent paid is deductible to the practice and tax-free to the dentist personally. For a practice paying $5,000 to $10,000 per qualifying day, that is $70,000 to $140,000 of after-tax cash to the owner annually. The documentation requirements are real and the use must be legitimate. A dental CPA who does this work knows where the audit line sits.

What Retirement Plans Save Dentists the Most Tax?

The right retirement plan for a dentist depends on practice profitability, owner age, and team size. A solo dentist with one or two W-2 employees often gets the largest deduction from a defined benefit pension plan, where contributions can reach $250,000 to $300,000 annually depending on age and income. Cash balance plans paired with a 401(k) work in similar situations. Older dentists nearing retirement use these structures to load up retirement savings in the final earning years. Younger dentists prioritize 401(k) and profit sharing for flexibility.

When Should a Dentist Switch CPAs?

Three signals matter. First, the CPA only calls in February to ask for the tax organizer. Year-round tax planning is the difference between $30,000 saved and $30,000 left on the table. Second, the CPA cannot answer dental practice questions in dental practice language (production per provider, hygiene reappointment rates, fee analysis). Third, the CPA has never recommended an S-corp election, a retirement plan beyond a SEP IRA, or a Section 179 strategy. Those are the basics. A dental CPA who has not raised them in a planning conversation is not doing dental planning.

Related Virjee Dental Services

Most dentists working with Virjee on tax strategy also use our dental bookkeeping services so the tax planning runs against accurate monthly numbers, our dental CFO services for practice profitability work, and our dental practice valuation calculator when an exit or partnership comes into view. For specific tax-saving strategies, the tax loopholes for dentists guide is the place to start.