While you’re busy building up your dental practice and offering patients the best treatment available, an efficient or outdated tax strategy could be silently squeezing your profits dry.

Missed tax saving opportunities continue to see dental practice owners unwittingly overpay in taxes, year on year. Those who choose not to seek help from a tax accountant for dentists often miss out on tax planning opportunities that are unique to the dental industry.

Here are 5 actionable tax planning tips for dental practitioners that could reduce their tax burden significantly:

1. Selecting the right business structure

Although the type of business structure you choose for your dental practice is important for reasons of liability, it’s also important in terms of your tax strategy. Often structured as Limited Liability Companies or LLCs, many dental practices choose this because of the liability safeguards it provides, along with tax flexibility. But that doesn’t necessarily mean that your dental practice should be an LLC; there’s no one-size-fits-all solution. Everything depends on the size of your practice, your unique situation, and your goals for the future.

Working with a tax expert can help you determine the best entity structure for your dental practice.

2. Making the most of retirement plan contributions

For dental practitioners, choosing the right kind of retirement plan can reduce their tax burden significantly. With access to a number of different plans – each of which has different limits for contributions and tax benefits – owners of dental practices classed as high-earners, can consider 401(k) plans, defined benefit plans or cash balance plans.

Often leading to tax savings that can amount to thousands of dollars, retirement plan contributions are worth looking at in detail with the help of a tax professional.

3. Strategically purchasing equipment

Having a significant impact on the tax liability of a dental practice, it’s always worth thinking carefully about when to invest in new equipment. Allowing you to deduct the total cost of eligible equipment in the year that it was bought, instead of it depreciating over a period of time, Section 179 creates a compelling opportunity for upgrading technology, or replacing old equipment while minimizing your tax burden. The real benefit lies in strategic timing however, and a tax expert with specific knowledge of the dental industry, is best positioned to guide you with this.

4. Optimizing your chosen accounting method

The cash-based accounting method is adopted by most dental practices that are small or mid-sized, and with income and expenses strategically timed, significant opportunities for tax planning can be created. The way in which cash-based accounting works allows for the creation of tax strategies at the end of the year that can substantially lower your tax liability.

5. Taking advantage of Qualified Business Income Deduction (QBI)

The QBI deduction – introduced by The Tax Cuts And Jobs Act enables those dental practices that are eligible, to deduct from their taxable income, up to 20% of their qualified business income. For the majority of dental practitioners, this deduction translates to tax savings of some significance. That said, optimizing this particular deduction requires meticulous dentist tax planning, and many seek professional guidance with this to ensure that they’re maximizing the benefits.

Although planning your taxes as a dentist or dental practice owner is about compliance, it’s also about formulating growth opportunities and achieving financial success. By tackling your taxes on a year-round basis, and not just when tax season rolls around, you can develop a tax saving strategy that addresses your immediate need to save money, as well as your future goals for long-term prosperity.