2023 Tax Code Updated for Dentists
Like other high-earning individuals, dentists may see adjustments in tax rates and income brackets. Economic conditions and government fiscal policies often influence these changes. Consider hiring bookkeeping services to get your affairs in order to ensure you fully benefit from tax savings.
Let’s take a look at how to take advantage of the new tax code:
Reduced Tax Rate for Business Structure
Dentists operating their own practices as S corporations, sole proprietors, or partnerships can use the Qualified Business Income Deduction. This allows them to deduct up to 20% of their qualified business income, reducing their taxable income.
The standard deduction amounts are adjusted annually to account for inflation and other economic factors. In 2023, the standard deduction amounts are as follows:
- For heads of household: $20,700.
- For married individuals and single filers filing separately: $13,950.
- For married individuals filing jointly: $27,900.
Section 179 Deduction
Deduction revised in Section 179 allows dentists to expense qualified property worth $1 million rather than let it depreciate. Qualified property includes:
- Office furniture
- Dental equipment
- TVs in the waiting room and computers
- Building improvements
Retirement Plan Contributions
Employer and personal tax-deferred contributions to the retirement plan reduce taxable income. As a dentist, this includes Simple IRA, SEP IRA, or 401(k). The contributions should be proportional to the employees’ income, saving you from maxing out your account.
The individual tax rate deduction for dentists with pass-through entities is 20% instead of 37% of their profit share. However, it has income limits:
- Full deduction will be given on an income of $157,5000 for single filers and $315,000 for joint filers.
- You can take advantage of the reduced deduction if your income is $207,500 as a single filer and $415,000 as a joint filer.
At higher income levels, dentists are not allowed to claim deductions because they run a personal service.
As a dentist, your primary role is to provide high-quality oral healthcare. Let Engage Advisors handle your financial matters, such as accounting, payroll, and tax compliance. We will help you navigate the complexities of tax codes, deductions, and credits, saving you money and avoiding potential legal issues. To learn more about our bookkeeper services, visit our website today.