It seems that I get question after question regarding what is taxable for Dentist. I created the following checklist to provide a broad stroke of what can be deducted in the Dentist business. Enjoy, and please feel free to comment below or ask a question!
1. Office Rent
You should know where your lease is. The IRS will sometimes ask to see it when they do an audit.
2. Uniforms
(This may be small $$ but it comes up so many times) The rule on clothing is this, if it is something that cannot be properly worn somewhere other than the person’s business office, then it is deductible.
3. Repairs
The costs of repairing your dental equipment, office, or business car are deductible. It is important that you save your receipts and I would pay by check rather than by cash.
4. Waste Removal
The costs of disposing of hazardous waste material are deductible. Save your invoices.
5. Utilities
Dentists tend to use a lot of water. The cost is deductible as are gas, electric and phone charges.
6. Cleaning Of Uniforms and the Office
The above item #2 and also the cost of cleaning your office are both tax deductible.
7. Alarm & Other Security Expenses
This would include security guards, watchdogs, alarm servicing and security cameras. (I know, but I have seen a watchdog)
8. Office Expenses/Supplies
This can be broad, but some office expenses might include ink cartridges, pads, pens and pencils and many other items.
9. Stationery and Printing
The costs of printing business cards, stationery and bills/invoices are deductible. Printing flyers and brochures would also be deductible.
10. Dental Supplies
Almost all dental supplies are tax deductible. Need to be careful here because if the item is more in the nature of equipment rather than a consumed item, you will have to depreciate it.
11. Dental lab
All lab bills are deductible. (But is the percentage you are spending on lab fees?)
12. Education Courses
All education that improves your current professional skills is deductible. If the education qualifies you for a “different profession”, then it is not deductible.
13. Entertaining
WARNING: Only HALF the cost of wining and dining your business associates is deductible. Here is key: You must save your dated receipts and keep a record of who you entertained and why they are business related.
14. Business Gifts Up To $25 Each
Keep a list of names and why they are business related. Again, records are important!
15. Professional Dues & Subscriptions
The costs of joining professional societies and of magazines and books for your office are deductible.
16. Licenses
The costs of your various professional licenses are tax deductible.
17. Travel And Convention Expenses
The cost of business related travel and conventions are deductible. This includes meals (50%), lodging and train, plane, car or taxi. Your spouse’s expenses may also be deducted if (big “if” here) the spouse works for you.
18. Telephone (Regular, Cell, Internet)
When they broke up Ma Bell, they said our lives would get easier. I don’t think they anticipated cell phone bills, internet bills, long distance bills and local carrier bills. As long as your phone costs are business related, they are deductible.
Save the logs of your calls to show they were to business associates. (Don’t assume 100% here)
19. Patient Refunds
Keep records of all refunds to patients giving their name, date and the reason payment was made to them.
20. Malpractice Insurance
This very major expense is currently deductible.
21. Other Insurance
Workers compensation, some disability insurance, liability insurance and general business insurance are currently deductible. (See your accountant regarding disability)
22. Professional Fees
The costs of lawyers, accountants, personnel people and architects are deductible if their work pertains directly to your business. Some personal legal fees are not deductible such as the legal costs to contest a will. (Even if you only pay $1 to a lawyer, they get a 1099 at year end)
23. Payroll/Payroll Taxes
Your staff’s gross payroll and the employer’s share of payroll taxes are deductible. This would include FICA expense, state and federal unemployment taxes.
24. Contracted Dentists/Temps
Outside dentists imply people who are not your employees but do contract work for you on a form 1099 basis. The IRS can, in some cases, really challenge this classification and is able to collect payroll taxes if it can show an employer-employee relationship exists.
25. Employee Benefits
Some of the benefits you give your employees such as health insurance or meals on premises are deductible by you.
26. Business Promotion
Expenses of promoting your business are deductible such as parties, signs and community projects sponsored by you.
27. Advertising
The costs of advertising are deductible including set-up and artwork. The cost of printing your brochures and flyers is deductible. (Hope you have something in place to track ROI)
28. Equipment Rental
Rental of equipment is deductible. (Sometimes people forget to pay sales tax on rental items.)
29. Depreciation of Dental Equipment
Depreciation is an accounting concept that accounts for the fact that equipment or buildings get older each year and therefore the taxpayer should get a deduction for this. The rules are very complex but it can be a major deduction for dentists since they use a lot of equipment.
30. Depreciation of Office Building
Depreciation on an office building is also allowed though you must depreciate buildings over a higher number of years than you may depreciate equipment.
31. Depreciation of Business Vehicles
You are allowed to depreciate qualified business vehicles according to complex IRS depreciation schedules. (Tricky for Dentist, but talk to your Accountant)
32. Amortization of Goodwill
The goodwill which you paid for when you purchased your practice can be written off over 17 years.
33. State and Local Income Taxes
The general rule is that state and local income taxes are deductible on federal tax returns. They are not deductible on state and local tax returns.
33. Sales Tax
Sales tax and or Use tax is deductible, and needs attention big time. Most people understand collecting and remitting sales tax but Use tax NOT paid on items should be paid in the appropriate jurisdiction if no exemption.
34. Pension Expenses
Pension plans have evolved into a very complex area. I advise dentists to use a pension specialist. There is usually a pension plan that is right for you. Most require that you must cover your employees as well. The IRS has been known to audit dentists’ pension plans on occasion.
