From the desk of STAC Bizness Solutions CEO, Shawna Aho

As a dental practice owner, you’re likely focused on caring for your patients and managing your team. But there’s another essential part of running a successful practice—managing your finances in a way that maximizes your profitability and minimizes your tax liability. One key strategy is knowing what business expenses are tax-deductible and understanding the recordkeeping the IRS expects.

In this post, I want to break down the basics of tax-deductible expenses and how to stay compliant while taking full advantage of them.

What Are Tax-Deductible Business Expenses?

Simply put, a tax-deductible business expense is a cost that’s both ordinary and necessary for the operation of your practice. “Ordinary” means it’s common in the dental industry, and “necessary” means it’s helpful or appropriate for your business.

Deducting these expenses reduces your taxable income, which ultimately lowers your tax bill. But not every expense qualifies, and even those that do require proper documentation.

Let’s take a closer look at some of the most common deductions for dental practice owners.

The Most Common Deductible Expenses in a Dental Practice

Employee Wages and Benefits
Paying your team, including dental assistants, hygienists, front office staff, and associates is a significant part of your budget. Salaries, wages, bonuses, and employer-paid benefits such as health insurance and retirement contributions are all generally deductible.

Facility Costs
If you rent office space, your lease payments are deductible. Utilities like electricity, water, internet, and phone services used for the practice also qualify. If you own your building, you may be able to deduct interest on a mortgage and property taxes, as well as depreciation over time.

Equipment and Supplies
Dental instruments, computers, office supplies, PPE, and cleaning materials are typically deductible. For higher-cost items like dental chairs or x-ray machines, you may deduct the full cost in the year of purchase through Section 179 or depreciate them over several years, depending on your tax strategy (questions about which approach is right for you? Just reach out to us for a free consultation).

Continuing Education and Professional Fees
The cost of maintaining your dental license, attending conferences, or subscribing to industry publications can be deducted. Membership dues for professional associations and fees paid to accountants, consultants, or legal advisors also fall into this category.

Marketing and Advertising
Whether you’re investing in a new website, online ads, print materials, or patient referral programs, these costs are generally deductible. The goal is to grow your practice, and the IRS recognizes these efforts as legitimate business expenses.

Insurance
Business-related insurance premiums, such as malpractice insurance, liability coverage, and workers’ compensation are all deductible.

Technology and Software
Monthly subscriptions for practice management software, accounting tools, or cloud storage used in your dental office may be deducted as long as they serve a business function.

Vehicle Expenses
If you use your personal vehicle for business purposes (such as visiting vendors, attending conferences, or banking), you can deduct the mileage or actual expenses for those trips. Be sure to distinguish between personal and business use.

Interest and Bank Fees
Interest on business loans or credit cards, as well as bank service charges, are also deductible—provided the accounts are used strictly for business.

What the IRS Expects: Proper Recordkeeping

Knowing what you can deduct is only half the battle. To protect yourself during an audit, the IRS requires that you keep accurate, detailed records that support your deductions.

Start with a system that separates personal and business finances. A dedicated business bank account and credit card make it much easier to track expenses and avoid confusion. From there, maintain the following documentation:

• Receipts and Invoices: Keep original copies of receipts and vendor invoices, especially for purchases over $75. Digital copies are acceptable, but they must be legible and accessible.
• Mileage Logs: For vehicle-related deductions, maintain a written or digital log that includes the date, mileage, destination, and purpose of the trip.
• Payroll Records: Keep payroll reports, tax filings, and W-2s for each employee. These should show not only what you paid your staff but also any taxes withheld or employer contributions made.
• Bank and Credit Card Statements: These help support expenses and prove payment dates. They should match up with your receipts and bookkeeping records.
• Contracts and Lease Agreements: Whether it’s your building lease or a service contract with a vendor, having signed agreements on file helps support ongoing expenses.
• Tax Filings: Keep copies of your federal and state tax returns, as well as any correspondence with the IRS.

Remember, the IRS recommends keeping most business records for at least three years, though longer is better for assets and payroll-related documents.

How STAC Bizness Solutions Can Help

It’s easy to get overwhelmed by all the rules and paperwork. That’s why STAC is here to help dental practice owners stay organized, compliant, and confident at tax time.

We can assist with:

• Setting up and maintaining a smart bookkeeping system
• Categorizing expenses properly so you don’t miss deductions
• Managing payroll in compliance with current tax laws
• Offering strategic tax planning services tailored to dental practices
• Providing data-driven insights so you can make better business decisions

By outsourcing these critical functions to professionals who understand the dental industry, you’ll save time, reduce stress, and ultimately increase your bottom line.

Final Thoughts

Taking advantage of legitimate tax deductions is one of the smartest ways to improve the financial health of your practice. But it only works if you track your expenses accurately and keep the right records.

If you’re unsure whether you’re maximizing your deductions, or if your recordkeeping could use a cleanup, we’re here to help!

Until next time, 

Shawna