Tax Planning for Dental Practice Owners

Tax preparation looks backward. Tax planning looks forward, while there is still time to make decisions. For dental practice owners, the biggest opportunities usually involve when equipment is bought, how owner pay is structured, how much goes into retirement plans and how state taxes are handled. Several of these rules changed under the 2025 federal tax law, commonly called the One Big Beautiful Bill Act. This guide summarizes the 2026 figures from IRS and Virginia sources, with a short look at the smaller strategies dentists often ask about. It is not tax advice; your CPA should run the numbers for your situation.

Start with a projection, not a receipt box

The most useful planning meeting happens in September or October, using year-to-date financials and a projection through December. That is early enough to adjust estimated payments, schedule equipment purchases and fund retirement plans. Waiting until the return is prepared in March leaves only a few options, mostly limited to certain retirement contributions. Reliable monthly books, as described in dental bookkeeping basics, are what make an accurate projection possible.

Consider a practice owner whose year-to-date numbers point to $500,000 of profit. A projection in October shows whether estimated payments are on track, whether a planned scanner purchase should be placed in service in December or January, and how much room remains for retirement contributions. The same decisions made in March are mostly no longer available.

The main 2026 levers at a glance

Each lever is explained below, with the source for each figure.

Entity and owner salary

How the practice is taxed sets the stage for most other decisions. A sole proprietor pays self-employment tax on nearly all net earnings; an S corporation owner pays payroll tax only on a reasonable salary, but that salary also affects retirement contributions and the QBI deduction. Changing to an S corporation for a given year generally requires filing Form 2553 within 2 months and 15 days after that year begins, so entity questions belong in the fall planning meeting for the following year. The details and a worked comparison are in how dental practice owners pay themselves.

Equipment: Section 179 and bonus depreciation

Dental practices buy expensive equipment: chairs, imaging, scanners, mills, lasers and computers. Two provisions can let you deduct much of that cost in the year the equipment is placed in service instead of over several years.

Section 179

For tax years beginning in 2026, IRS Rev. Proc. 2025-32 sets the expensing limit at $2,560,000, reduced dollar for dollar when total qualifying property placed in service during the year exceeds $4,090,000. Section 179 generally cannot create a loss beyond your business income.

Bonus depreciation

The 2025 law made 100% bonus depreciation permanent for qualified property acquired after January 19, 2025, as described on the IRS. Unlike Section 179, bonus depreciation is not capped by business income.

What an equipment deduction is really worth

A deduction saves tax at your marginal rate, not dollar for dollar. Take a $120,000 CBCT unit for an owner in the 35% federal bracket (for 2026, taxable income from $512,450 to $768,700 on a joint return, per Rev. Proc. 2025-32). Expensing it all in 2026 lowers that year’s federal tax by roughly $42,000, but the practice still spent $120,000, and it gives up the depreciation it would otherwise have deducted in later years. Financing the unit does not change the deduction, which is why expensing financed equipment can leave a tax saving larger than the first year’s payments.

Virginia does not follow all of it

According to Virginia Tax Bulletin 26-1, Virginia now conforms to the federal tax code as of December 31, 2025, continues to decouple from federal bonus depreciation and has decoupled from the 2025 law’s increased expensing limits. In practice, the Virginia deduction for the same equipment is often smaller and spread over more years, so the practice needs separate Virginia depreciation records and the state saving should not be assumed to match the federal one.

Two cautions. First, equipment must be placed in service, not just ordered, by year-end. Second, a large deduction this year means smaller deductions later, and it can reduce the profit lenders see. Buy equipment because the practice needs it; let the tax rules affect the timing. Our dental equipment budgeting guide helps with the decision itself.

The QBI deduction for dentists

The qualified business income deduction lets many pass-through owners deduct up to 20% of qualified business income, and the 2025 law made it permanent. Health care, including dentistry, is a specified service trade or business, which means the deduction phases out at higher incomes. For 2026, Rev. Proc. 2025-32 lists:

Figures are taxable income before the QBI deduction. A married dentist with $480,000 of taxable income is about halfway through the $150,000 joint phase-out range, so roughly half of the deduction is lost; at $553,500 or more it is gone entirely. Inside the range, W-2 wages paid by the practice and the owner’s salary choice both affect the result. A retirement contribution that lowers taxable income can sometimes restore part of the deduction, which is a good reason to model owner salary and retirement funding together.

Retirement plans

For many owners, retirement contributions are the largest deduction they can control. For 2026 the IRS lists a $24,500 employee deferral limit for 401(k) plans, an $8,000 catch-up for those 50 and older ($11,250 for ages 60 to 63), a $72,000 overall defined contribution limit and a $290,000 limit on the annual benefit a defined benefit plan can provide, per the IRS COLA table.

The deduction is a deferral, not an exemption: you pay tax when you withdraw. Still, for the owner in the example above, a $50,000 contribution at a combined federal and Virginia marginal rate of about 40% lowers this year’s tax by roughly $20,000. Owners who want to save more than the defined contribution limit sometimes add a cash balance plan. These plans have required contributions for eligible staff and ongoing administration costs, so plan design should involve a third-party administrator.

Contribution deadlines differ by plan type. According to the IRS SEP page, a SEP can be set up and funded up to the business’s return due date, including extensions, while 401(k) salary deferrals have to come out of pay during the year. That is another reason to raise retirement questions in the fall rather than at tax time.

Health savings accounts

If you are covered by a qualifying high-deductible health plan, an HSA offers a deduction going in, tax-free growth and tax-free withdrawals for medical costs. For 2026, IRS Rev. Proc. 2025-19 sets the contribution limit at $4,400 for self-only coverage and $8,750 for family coverage, plus a $1,000 catch-up from age 55. How an owner’s HSA contribution is reported differs for S corporation owners, so tell your payroll provider and CPA before contributing through the practice.

Hiring your children

Paying a child a fair wage for real work, such as filing, scanning or cleaning, shifts income to someone in a lower bracket and the child can fund an IRA. The payroll-tax break is narrower than many owners hear. According to the IRS family employment page, wages a sole proprietorship (or a partnership owned only by the parents) pays a child under 18 are not subject to Social Security and Medicare tax, and wages to a child under 21 are not subject to federal unemployment tax. A corporation, including an S corporation, gets no such exemption: the child’s wages are taxed like any other employee’s. Either way, keep a job description, timesheets and pay that matches the work.

Smaller strategies to ask about

Renting your home for practice meetings

IRS Publication 527 says that if you rent out a home you also live in for fewer than 15 days in the year, you do not include the rent in income. Some owners have the practice rent their home for genuine business meetings, such as a quarterly team planning day. It only holds up with a real business purpose, rent in line with what a comparable venue would charge, and records of each meeting. Ask your CPA before relying on it.

If you own your building

Owners who hold their office in a separate entity and lease it to the practice can sometimes accelerate depreciation on parts of the building with a cost segregation study, and should make sure the practice pays a market rent under a written lease. Both affect the practice P&L, a future sale and how lenders view the numbers.

Charitable giving under the 2026 rules

According to the IRS Form 1040-ES (2026) instructions, beginning in 2026 itemizers can deduct charitable contributions only to the extent they exceed 0.5% of adjusted gross income, on top of the overall limit on itemized deductions. Non-itemizers can deduct up to $1,000 ($2,000 joint) of cash gifts to eligible charities. For an owner with $600,000 of AGI, the first $3,000 of gifts each year is not deductible, which makes grouping several years of giving into one year more attractive.

The SALT cap and Virginia’s pass-through entity tax

The federal deduction for state and local taxes is capped. IRS Publication 505 gives the 2026 cap as $40,400 ($20,200 married filing separately), reduced when modified adjusted gross income exceeds $505,000, but not below $10,000. Many dentists with strong practice income fall into that reduction range.

Virginia lets qualifying pass-through entities elect to pay state income tax at the entity level at 5.75% under Va. Code § 58.1-390.3. The election is made on the entity’s timely filed return, including extensions. The entity-level tax is generally deductible federally by the business, which can work around the individual SALT cap, and owners receive a Virginia credit. The years for which the election is available have been set and extended through Virginia’s budget legislation, so confirm with your CPA that it applies to the current year and whether it still saves money given the higher federal cap.

Estimated taxes and timing

Pass-through owners pay their own income tax on practice profit, usually through quarterly estimates. Publication 505 and the 2026 Form 1040-ES explain the safe-harbor rules: paying at least 90% of this year’s tax, or 100% of last year’s tax (110% if prior-year adjusted gross income was over $150,000), generally avoids an underpayment penalty, even if you owe more at filing. Virginia’s first installment falls later than the federal one, according to Virginia Form 760ES (2026):

If profit jumps late in the year, the fourth installment is where the catch-up happens. Building the estimates into your monthly forecast, as covered in managing cash flow in a dental practice, keeps a large January or April payment from draining the operating account.

Local business taxes

Northern Virginia practices also deal with local Business, Professional and Occupational License (BPOL) taxes and business personal property tax on equipment. These are not federal planning items, but they belong in the budget. See BPOL licenses for dental practices in Virginia.

A year-round planning calendar

1. January–March: close the prior year, fund prior-year retirement and HSA contributions where allowed, confirm estimates.
2. April–June: make first and second quarter estimates (federal April 15, Virginia May 1); review owner salary.
3. July–September: mid-year projection; decide on equipment, entity and plan changes.
4. October–December: final projection, place equipment in service, fund plans, consider the PTET election and complete the year-end dental practice checklist.

Common planning mistakes

• Ordering equipment in late December that is not delivered and installed until January, so it is not placed in service in the year you expected.
• Buying equipment the practice does not need just to reduce tax, which still spends real cash.
• Skipping a mid-year projection and discovering a large balance due in April.
• Underpaying estimates because last year was a low-income startup year, then facing a large payment when income rises.
• Assuming the payroll-tax break for hiring children applies to an S corporation practice.
• Forgetting that expensing equipment now leaves less depreciation to deduct in later years.

What to bring to a planning meeting

1. Year-to-date P&L and balance sheet, reconciled through the most recent month.
2. A projection of collections and expenses for the rest of the year.
3. Planned equipment purchases with expected delivery and installation dates.
4. Payroll year-to-date for the owner and team, including retirement plan deferrals.
5. Estimated tax payments made so far, federal and Virginia.
6. Any major life or practice changes: a new associate, a second location, a home purchase, a planned sale.

With those in hand, a planning meeting can focus on decisions rather than gathering data. If your books are not ready by the fall, in-house vs. outsourced dental bookkeeping covers how to fix that before next year.

Planning with a dental CPA

Tax rules change, and the 2025 law changed several at once. Cisor’s dental accounting and tax team builds year-end projections around your practice’s actual numbers and walks through the options before December. Call (703) 345-0606.