Income Tax Credits and Deduction Tips for Dentists
Recent findings suggest that taxes every year taxpayers overpay their taxes by more than a billion dollars as they benefit from all the tax credits, deductions and adjustments that they are eligible for. If you are paying more than 30 percent in federal and state taxes then you are overpaying. Lost opportunities for legally reducing taxes costs dental companies thousands of dollars every year. If you add all these missed opportunities and overpayments, some dentists lose over a million dollars in a few years of practice.
Luckily, tax overpayment is reversible through small business cpa accounting practices. If you are like most dental centres, you are paying a great amount in taxes each year. What you fail to recognize is that some of this amount can be legally reduced and added to your profits. Each of the below mentioned tips are in line with the law and prepared after consultation with inputs from small business accounting services in the country.
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Improve your Business Structure
One of the primary reasons why dentists overpay their taxes is because of inefficient business practices. Implementing the best business entity is important and crucial for the well-being of your business. Most successful dental practices need to be operated under more than one undertaking. In a way, this makes your system complex but if you look at the potential advantages, it makes complete sense to implement a complex structure. Your business can take legal advantage through income shifting if the practice is run under different entities. If you are not sure how to go about this option, you can consult a cpa columbia md or any good small business accounting company.
Claim all Tax Deductions
Most dental practices plan an annual Christmas party every December to celebrate with their staff. Usually, these expenses are recorded by the dental practice as a form of entertainment which is only 50 percent tax deductible. The tax department permits upto 6 meals to be 100 percent tax deductible, provided every one in your staff is invited to the party. If you forget to categorize these small expenses in a proper category can make you lose 50 percent of the deductions. These small steps look very insignificant but it can hurt your dental practice in the long run. If you think your dental practice is not taking legal advantage of these deductions, it is time to contact a qualified cpa in Columbia.
Employ your Family
Successful dental practices employ their family members to ace the tax deductions game and enjoy instant benefits. Family members are generally entitled to gain dividends if they work more than twenty hours per week for your practice throughout the financial year. Your closest family member could earn more than $25,000 in dividends with this scheme and would be entitled to pay a negligible sum of around $500-700 in personal taxes. So, if you are paying a family member who is employed at your practice a decent amount can ultimately win your brownie points as well as tax savings. To maximize on these types of tax deductions, many dentists are taking help from tax accountant columbia md and reap long term benefits for their dental practice.
Increase your Donations
Now, you can give public shares to a non-profit organization. In return, your dental practice gets a donation acknowledgement for the market value of these shares. By doing so, you will not pay additional personal taxes on the gain. This tip can help you save hundreds of dollars every year if you are doing your tax preparation in maryland.
Optimum Salary + Dividend
Depending on the situation, every person can have a good mix of salaries and dividends which can reduce their personal taxes. Your dental practice can save a good chunk in tax deductions by determining an optimum mix of salaries and dividends that you can obtain from your dental practice. Speak with your dental cpa or advisor today to find the right mix for your dental practice.
Plan for the Future
Saving on taxes begins with a long term tax plan devised by your accounting team in accordance with your goals. Unlike tax preparation, usually tax planning allows you to take crucial measures in consequent tax years. There are certain tax relaxation laws for dentists that allow you to structure your financial journey with minimum tax deduction. Fix a meeting with your accountant/advisor to reexamine your previous year’s tax return which will help them to devise a plan for the current year.
By now, it is evident that by using the above tips your dental practice can reduce tax deductions for the current financial year and avoid thousands of dollars going to the tax department. You must plan and review all extra businesses, property rentals, donations and business asset depreciation with the help of tax accountant columbia md. By doing this, it is easy to determine current problems and actively implement a tax saving plan to increase profitable opportunities.