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Every dental professional in Texas faces a lot of challenges, from investing in tools to enhancing patient experience. Whether you are working as an independent contractor or have grown your dental practices over the years, you might want to save on taxes for retirement.
There are several ways to maximize tax deductions for dental practices, which include choosing the right business entity, keeping detailed records of transactions, and section 199 tax deductions.
If you want to maximize tax deductions for your dental practices, CFO advisors in Southwest Houston, TX, can help you. From offering advice to helping you plan your retirement, a CFO comes in handy in various financial decisions.
Top four strategies for maximizing deductions for dentists
Choose the right entity
Choosing the right business entity can have a significant impact on your taxes, retirement savings, and how protected you are from financial risks. The way you set up your dental practice can influence everything from operations to how you protect yourself from creditors.
There are five types of business structures available in Texas: sole proprietorship, partnership, C-corporation, S-corporation, and limited liability company (LLC). Among these, S-Corporation and Limited Liability Company are the most common among Texan dentists.
These can protect dentists from business liabilities. While making changes in your business structure, make sure to compare all the pros and cons of the options available to you.
Claim deductions through Section 199, “Domestic Production Activities Tax Production.”
You might be able to save on taxes if you use special equipment like CAD/CAM to make things like mouthguards, bond brackets, and retainers in your dental office. Since these activities come under manufacturing, you can save thousands of dollars in taxes.
If you make a profit from manufacturing braces, the government lets you subtract 9% of that profit from the amount of tax you owe. However, there are some limitations.
To make sure how much you can save on your taxes, talk to a Texan tax expert today. They can help you understand if your practices qualify as manufacturing and claim tax deductions.
Keep detailed records
Make sure you maintain records of all your expenses, no matter how small they seem. Keeping detailed records of every expense helps you understand your business’s financial health. It helps you maximize tax deductions, as smaller expenses can add up to significant savings at tax time.
Incorporating digital tools and technologies can make this procedure easier and more manageable. It helps you capture images of the recipes and categorize expenses. These cloud-based accounting data save your financial data securely and allow access from anywhere.
By tracking your expenses, you are not only saving money on taxes but also getting valuable insight into your business performance.
Fund a qualified retirement plan
Funding for a retirement plan not only saves your future but also your money on taxes. Many dentists often face problems with saving money for their retirement. It is because they are too busy investing in their business or paying off debts.
Instead of relying on a single investment plan for your future, take advantage of every option available. Consider different options and try investing in bonds, mutual funds, or gold instead of just investing in real estate or stocks.
Many dentists find that combining a profit-sharing plan with a 401(k) is a smart way to save for retirement. If you are under 50, this plan allows you to put in a maximum of $61,000 in this account for that year. However, if you are above 50, you get a bonus. You can save an extra $6,500 on top of the regular $61,000.
Take advantage of your deductions!
Dentists can work on the above-mentioned strategies and reduce tax liabilities while growing their businesses. Hire a qualified tax professional in Texas to learn more about tax planning services!
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