Why Year-End Tax Planning Matters
Tax planning isn’t about reacting in April; it’s about acting before December 31. If you run a dental practice, you’re juggling patient care, staff management, and rising costs. It’s easy to push financial strategy to the back burner. But waiting could cost you tens of thousands in unnecessary taxes.
Here are five tax strategies you can act on now to reduce your tax bill, strengthen your retirement savings, and set up your practice for long-term success.
1. Leverage Bonus Depreciation and Section 179 Deductions
Key takeaway: If you’re planning to upgrade your practice, doing it before December 31 helps you capture the tax savings immediately. Always weigh the deduction against your cash flow and financing needs.
Congress restored 100% bonus depreciation for 2025, along with higher Section 179 deduction limits. For dentists, this means you can write off the full cost of big-ticket purchases in the year you buy them instead of spreading deductions out over time.
Think about equipment like CBCT scanners, digital impression systems, or even new operatories. For example, if you purchase $100,000 worth of equipment this year, you can deduct that entire amount on your 2025 tax return. That’s a direct reduction of your taxable income.
2. Maximize Retirement Contributions
Key takeaway: Max out your retirement accounts before year-end. It’s one of the simplest, most effective ways to reduce your tax bill while securing your financial future.
The IRS increased retirement plan contribution limits for 2025. That means you can shelter more of your income from taxes while building long-term wealth.
- 401(k): Higher annual deferrals allow you to reduce taxable income while investing for retirement.
- Profit-sharing or SEP IRA: Great for practice owners who want larger deductions.
- Defined benefit plans: Especially valuable for high-income dentists, letting you contribute and deduct much more.
3. Review Your Practice Entity for Tax Efficiency
Key takeaway: Have a dental CPA review your structure before year-end. Small changes in how your practice is organized can translate into thousands in annual tax savings.
Too many dentists stick with the same business structure for years without reviewing it. But your entity choice directly affects how much tax you pay.
Operating as a sole proprietor or PLLC often means higher self-employment taxes. Switching to an S-Corp or a multi-entity setup can reduce those taxes and improve access to deductions.
4. Take Advantage of Tax Credits for Staff Benefits
Key takeaway: Review available credits and see which ones apply to your practice. You’ll save money while investing in your team.
Offering employee benefits isn’t just good for retention—it can also lower your taxes.
Credits are available for things like:
- Health insurance coverage
- Childcare assistance
- Continuing education for your staff
These credits directly reduce the taxes you owe, dollar-for-dollar. For example, a qualifying benefit program could offset thousands of dollars while boosting morale in your office.
5. Plan for Practice Transitions or a Future Exit
Key takeaway: If you’re even thinking about transitioning your practice in the next five to ten years, year-end is the right time to start planning. Early preparation maximizes practice value and minimizes taxes when you exit.
Even if retirement feels years away, tax planning for an eventual transition should start now. Selling or passing on your practice without a strategy often leads to higher taxes than necessary.
Smart planning helps you manage:
- Capital gains
- Installment sales
- Possible exclusions, like Qualified Small Business Stock (QSBS), where applicable
Proactive Planning Pays Off
Dentists who take action before December 31 lock in real savings and position themselves for long-term financial health. Don’t wait until April when your options are limited. Review these five moves now with your CPA and put yourself in control of your tax outcome.