By Susan Nevenhoven, Client Advisor
Even though all practice owners want to pay less in taxes, some of the best opportunities for reducing their tax liabilities get overlooked. Here’s our list of the five tax deductions most often missed by dental practice owners. Not all of these apply to everyone, but most practice owners will find at least one that works for them. How many of these deductions do you qualify for and how many are you actually taking?
#1 Most Missed Deduction – Home Office
Most dentists spend at least 40 hours per week at their clinic, and the majority of that time is spent treating patients. In addition to seeing patients, there’s a lot of time practice owners spend on things like responding to emails, paying bills, reviewing charts, etc. That’s the kind of work most dentists prefer to do from home. By having a dedicated home office that’s only used to conduct the business of your practice, you are eligible to take this deduction.
#2 Most Missed Deduction – Automobile Expense
Having a home office will increase your automobile deductions. You’re not allowed to deduct travel to and from your office at the beginning and end of the day, but you are allowed to deduct all travel that occurs during the day. If you stop at your home office in the morning, perhaps to check your email or review your schedule, you can then deduct the mileage to and from your clinic. Over the course of the year, those miles add up.
#3 Most Missed Deduction – Business Events Held at Your Home
If you host a business event, a team meeting, or a holiday party at your home, you are eligible for a deduction by renting your personal residence to your business. If you were to hold an event at another location, such as a hotel, conference center or restaurant, think about paying yourself to have it at your home instead. The amount needs to be reasonable and should be based on current market rates, but as long as the event can be tied back to work, it’s a deduction you’re entitled to.
#4 Most Missed Deduction – Travel for Board of Directors
Many practices are set up as a corporate entity with board members, and often the board members may be the owner and spouse. If you fall into this category, you are eligible to deduct travel costs for you and your spouse for a trip that otherwise would have been only for personal travel. Certain rules apply, such as travel must be within the U.S., but if you hold a board of directors meeting or retreat anywhere within the U.S. the costs of travel and hotel can be deducted.
#5 Most Missed Deduction – Employing Children
If you have children of any age, this is a great way to get them involved in your work while reducing your tax burden. It doesn’t matter what age your children are, there’s a way for them to get involved. If they’re young, they can earn fees for modeling – use their photos on your social media, website, or promotional material. If they’re older, they can help clean the office, help with administrative tasks, or update your social media posts. It needs to be actual work, but the money they earn is deductible.
If you want to make sure you’re not missing opportunities to lower your taxes, contact Engage Advisors. We’ll make sure your tax plans are up to date and that you’re taking all the deductions you’re entitled to. We work hard to help keep your money in your pocket.