Tax Accountant For Dentists

Dental practices have unique tax obligations due to the nature of their income streams and expenses. You collect payments directly from patients, receive reimbursements from insurance carriers, and write off amounts that insurance contracts don’t cover. The IRS has rules for when these transactions count as income and how costs tied to patient care should be recorded: if you’re not familiar with them, it’s easy to make mistakes that could trigger an audit or worse.

Practice expenses can be just as complicated. You’ve likely had to pay for lab fees, dental supplies, equipment leases, and staff wages, but the tax treatment varies depending on the item. A crown sent to an outside lab is deductible immediately, while a CBCT scanner has to be depreciated over several years. The way you categorize these costs affects your taxable income, and incomplete records can lead to disallowed deductions.

At USA Tax Gurus, our dental tax accountants work with dental practices to prepare tax filings that accurately reflect your fee schedule, insurance contracts, and equipment purchases. Our services start at $499 per month, so let us know how we can help you stay profitable and compliant.

Benefits of Choosing USA Tax Gurus for Your Tax Needs

USA Tax Gurus handles the tax preparation and filing requirements for dental practices of all sizes. We track patient payments, insurance adjustments, and business expenses so your return reflects actual financial activity from the year. Our team verifies that equipment purchases are depreciated correctly and that lab costs appear in the right expense category. Below are the advantages of working with a tax accountant for dental practices.

Benefit	What It Means for Your Dental Office
Insurance and Cash Payment Tracking	We reconcile your practice management software reports with bank deposits to confirm that patient payments and insurance reimbursements are recorded accurately and reported in the correct tax year.
Lab Fee and Supply Documentation	We verify that invoices for dental labs, supply vendors, and equipment purchases are categorized correctly and that costs paid during the year appear as deductions on your return.
Equipment Depreciation Calculation	We set up depreciation schedules for chairs, X-ray machines, scanners, and other equipment so each item follows the IRS recovery period assigned to dental assets.
Entity Return Preparation	We prepare Schedule C for solo practitioners, Form 1065 for partnerships, or Form 1120-S for S corporations, ensuring your return matches your practice’s legal entity.
Multi-Location Filing Support	When you operate dental offices in different states, we handle the tax filings required in each jurisdiction and track income by location.

How a Tax Accountant Can Support Your Dental Office

When you run a busy dental practice, you’ve got a lot of financial activity to keep track of: patient payments, insurance reimbursements, lab costs, and equipment purchases throughout the year. We prepare tax returns for sole practitioners, partnerships, and S corporations, applying IRS rules to each category of income and expense. Your return accurately reflects the financial activity from your practice throughout the year.

Service	What It Means for Your Rental Business
Revenue Recognition and Reporting	We review your practice management software reports to identify when payments were received from patients and insurance companies. Cash-basis practices report income when payment arrives, and we match your deposit records with your billing system to confirm amounts and timing.
Insurance Adjustment Tracking	We account for contractual adjustments that reduce your billed charges to the amount insurance companies actually pay. These write-offs aren’t deductions because you never received the money, and we make sure your income reflects only what you collected.
Lab Fee Deductions	We categorize payments to dental labs for crowns, bridges, dentures, and other prosthetics. These costs are deductible in the year you paid them, and we verify each invoice matches your lab statements so the deduction is supported.
Dental Supply Expenses	We track purchases of gloves, masks, anesthetics, amalgam, composite materials, and other clinical supplies. These items are deductible when purchased, and we match your supply invoices with payment records to calculate the annual total.
Equipment Depreciation	We calculate depreciation for dental chairs, X-ray units, CBCT scanners, sterilizers, and other equipment. Each item follows a recovery period assigned by the IRS, and we set up schedules that reduce your taxable income over the life of the asset.
Leasehold Improvement Depreciation	We track costs for buildouts, plumbing for operatories, electrical work, and other improvements to your leased office space. These improvements follow a 15-year recovery period, and we calculate the annual deduction based on when you placed the improvement in service.
Employee Wage and Benefit Reporting	We verify that W-2 forms for hygienists, dental assistants, and front desk staff are filed correctly. We also track health insurance premiums, retirement plan contributions, and other benefits you provide, which are deductible as employee expenses.
Associate Dentist Payments	We classify payments to associate dentists based on how you compensate them. Associates who receive W-2 wages are employees, while those who receive 1099-NEC payments are independent contractors. We verify that your classification matches the working relationship and prepare the required forms.
Continuing Education Costs	We deduct registration fees, travel, and materials for CE courses required to maintain your dental license. These costs must relate to your current practice, and we review your receipts to confirm they qualify.
Malpractice Insurance Premiums	We deduct premiums for professional liability coverage. These amounts appear on your insurance statements, and we enter them for the coverage period they apply to.

Equipment Depreciation Rules for Dental Practices

Dental equipment loses value over time, so the IRS lets you deduct a portion of the purchase cost each year through depreciation. Most dental equipment is depreciated under the IRS’s Modified Accelerated Cost Recovery System (MACRS). Each type of equipment follows a recovery period set by the IRS, and the deduction begins when you start using it. We calculate these schedules so your return reflects the correct depreciation for each asset you own.

Here’s how depreciation works for dental equipment:

• Dental Chairs and Operatory Equipment: Dental chairs, delivery systems, and operatory lights follow a seven-year recovery period. The IRS classifies these items as office furniture and fixtures. When you purchase a new chair, we record the cost and apply the depreciation schedule, starting in the month you begin using it for patient care.
• X-Ray and Imaging Equipment: Digital X-ray sensors, panoramic machines, and CBCT scanners follow a five-year recovery period. These items fall under the IRS category for computers and peripheral equipment. We calculate the annual deduction based on the purchase price and the date you placed the equipment in service.
• Sterilization Equipment: Autoclaves, ultrasonic cleaners, and sterilization monitoring systems follow a five to seven-year recovery period. These items are considered medical equipment. We set up depreciation schedules that account for the month you started using each piece.
• Handpieces and Small Tools: Electric and air-driven handpieces, scalers, and curing lights are typically expensed immediately if they cost less than the IRS threshold for capital assets, which is currently $2,500 per item. Items above this threshold must be depreciated over five years. We review your equipment purchases to determine which treatment applies.
• Intraoral Cameras and Scanners: Cameras and digital scanners used for diagnostics and treatment planning follow a five-year recovery period. These items are classified as computer or electronic equipment. We enter the purchase date and calculate the deduction for each year of the recovery period.
• Office Computers and Software: Computers, servers, and off-the-shelf software follow a five-year recovery period. Custom software may require a different treatment depending on how it was purchased. We review your invoices to classify each item correctly.
• Leasehold Improvements: Buildouts for your office space, including plumbing for operatories, custom cabinetry, and electrical installations, follow a 15-year recovery period. These improvements are tied to the lease, and depreciation stops if you vacate the space before the schedule ends. We track the placed-in-service date and calculate the annual amount.
• Section 179 Deduction: The IRS allows you to deduct the full cost of qualifying equipment in the year of purchase instead of depreciating it over several years. The deduction has annual limits, and it can’t create a loss on your return. We review your equipment purchases to determine if Section 179 reduces your tax liability more than standard depreciation.
• Bonus Depreciation: For certain new equipment, the IRS allows an additional first-year deduction. This deduction applies after Section 179 and can cover a large percentage of the remaining cost. We calculate whether bonus depreciation benefits your practice based on your income and the equipment you purchased.
• Mid-Year Convention: The IRS uses a half-year convention for most dental equipment, which means you receive half of the normal depreciation in the first year, regardless of when you purchased the item. Equipment placed in service during the last quarter of the year may follow a mid-quarter convention. We apply the correct convention based on when you bought the equipment.
• Trade-Ins and Upgrades: When you trade in old equipment for new items, the IRS requires that you reduce the cost basis of the new equipment by the trade-in value. This affects your depreciation schedule. We track trade-ins and adjust the basis so your deduction matches IRS rules.

When we review your equipment purchases, invoices, and placed-in-service dates, we assign each item to the correct recovery period and calculate the annual depreciation. Your return includes schedules for all depreciable assets, and each figure matches the IRS timeline for that category of equipment.

Reporting Your Dental Practice Income

Your dental practice income must match the payments you received throughout the year from patients and insurance companies. We review your practice management software reports and bank statements so the income on your return reflects what actually entered your accounts. Examples include:

• Patient Co-Pays and Deductibles: Amounts patients pay at the time of service count as income on the date you received them. These payments appear in your daily deposit records and practice management software. We match your deposit slips with your software reports to confirm the amounts are accurate.
• Insurance Reimbursements: Payments from dental insurance companies count as income when the check or electronic deposit reaches your account. The date the insurance company processed the claim doesn’t determine the tax year. We use your bank statements to identify when each insurance payment arrived.
• Out-of-Pocket Patient Payments: When patients pay the full cost of treatment without insurance, those amounts count as income on the payment date. These transactions appear in your daily receipts and bank deposits. We match these records to verify the totals.
• Payment Plan Installments: When patients pay for treatment over several months, each installment counts as income in the month you receive it. The total treatment cost isn’t income until you actually collect the payments. We track your payment plan records to confirm when each installment was received.
• Contractual Adjustments: Write-offs required by insurance contracts don’t count as income because you never received those amounts. Your practice management software shows these adjustments as the difference between your fee schedule and the insurance allowed amount. We exclude these write-offs from your income calculation.
• Bad Debt Write-Offs: Unpaid patient balances that you write off as uncollectible aren’t deductions because you already excluded them from income. Cash-basis taxpayers only report income when payment is received, so balances you never collected don’t appear on your return. We verify that written-off amounts weren’t included in your income totals.
• Refunds to Patients: When you refund overpayments to patients or insurance companies, those amounts reduce your income for the year. If the overpayment occurred in a prior year, the refund may require a different treatment. We review your refund records to apply the correct rule.
• Capitation Payments: If you participate in capitation plans where you receive a monthly payment per enrolled patient, regardless of services provided, those payments count as income each month. These amounts appear on statements from the insurance company. We include them based on when you received each payment.
• Membership Plan Fees: If you offer an in-house membership plan where patients pay monthly or annual fees for covered services, those fees count as income when received. The timing depends on whether the fee is refundable. Non-refundable fees are income immediately, while refundable fees may follow different rules. We review your membership agreements to determine the correct treatment.
• Product Sales: Revenue from selling electric toothbrushes, whitening kits, night guards, or other products to patients counts as income. These sales appear in your point-of-sale system or daily receipts. We include these amounts based on when you received payment.
• Associate Dentist Production: If you pay associate dentists based on a percentage of their production, your gross income includes all revenue generated by associates before you pay them their share. The amounts you pay associates are deductions, not reductions to income. We calculate your total practice income and then deduct associate compensation separately.

When you send us your practice management reports, bank statements, and insurance remittance records, we match each entry with the IRS definition of dental practice income. Your return reflects the full range of payments you received, including patient co-pays, insurance reimbursements, and product sales. This gives you a return that matches your financial records.

Expense Categories for Dental Practices

Your dental practice expenses reduce taxable income when they’re documented and categorized correctly. The IRS allows deductions for costs tied to patient care, office operations, and staff compensation, but each category must meet the requirements for business expenses. We review your invoices and receipts so every expense appears in the correct place on your return.

Common deductible expenses include:

• Dental Lab Fees: Payments to labs for crowns, bridges, dentures, implants, and other prosthetics are deductible in the year you paid them. These costs appear on lab invoices that show the patient’s name, the service provided, and the amount charged. We match these invoices with your payment records to calculate the annual total.
• Clinical Supplies: Purchases of gloves, masks, gauze, anesthetics, bonding agents, impression materials, and other items used during patient care are deductible. These supplies are expensed when purchased, not when used. We review your supply vendor invoices to verify amounts and payment dates.
• Office Rent: Monthly rent for your dental office is deductible based on your lease agreement. If you own the building, you can’t deduct rent, but you may depreciate the building and deduct mortgage interest. We review your lease or mortgage documents to determine the correct treatment.
• Utilities: Electricity, water, gas, internet, and phone service for your practice are deductible. These costs appear on monthly bills from utility companies. We match your bills with payment records to confirm the amounts paid during the year.
• Malpractice Insurance: Premiums for dental malpractice coverage are deductible for the period they cover. Some policies are billed annually, while others charge quarterly or monthly. We enter the amount you paid during the tax year based on your insurance statements.
• Health Insurance for Employees: Premiums you pay for employee health coverage are deductible as employee benefit costs. These amounts appear on invoices from your insurance carrier. Self-employed dentists may deduct premiums for their own coverage on their personal return, not as a business expense.
• Retirement Plan Contributions: Contributions to employee 401(k) plans, SEP IRAs, or SIMPLE IRAs are deductible. These amounts appear on plan statements and must match the contributions reported on employee W-2 forms. We verify that your contributions meet IRS limits and are recorded correctly.
• Staff Wages: Salaries and hourly wages paid to hygienists, dental assistants, receptionists, and office managers are deductible. These amounts appear on payroll records and must match the W-2 forms you issued. We review your payroll summaries to confirm the annual totals.
• Continuing Education: Registration fees, travel costs, and materials for CE courses required to maintain your dental license are deductible. The courses must relate to your current practice. We review receipts and course descriptions to verify that each expense qualifies.
• Professional Dues: Membership fees for the American Dental Association, state dental associations, and specialty organizations are deductible. These charges appear on annual membership statements. We enter the amounts you paid during the year.
• Marketing and Advertising: Costs for your practice website, online ads, direct mail campaigns, and patient newsletters are deductible. These expenses appear on invoices from marketing agencies, web developers, or advertising platforms. We enter these amounts based on payment dates.
• Legal and Accounting Fees: Fees paid to attorneys, accountants, and bookkeepers for services related to your practice are deductible. These charges must tie to business operations, not personal matters. We review each invoice to confirm the service relates to your dental practice.
• Bank Fees and Merchant Services: Monthly account fees, credit card processing fees, and transaction charges are deductible. These amounts appear on bank statements and merchant service reports. We total these fees for the year and enter them as operating expenses.
• Office Supplies: Purchases of pens, paper, printer toner, appointment cards, and other administrative supplies are deductible. These items must be used in your practice. We review supply receipts to confirm the purchases relate to business operations.
• Software Subscriptions: Monthly or annual fees for practice management software, billing systems, and scheduling platforms are deductible. These costs appear on subscription invoices or credit card statements. We enter the amounts paid during the year.
• Repairs and Maintenance: Costs to repair equipment, fix plumbing, patch walls, or service HVAC systems are deductible in the year you paid them. These expenses restore items to working condition without adding long-term value. We review invoices to confirm each repair qualifies for immediate deduction.
• Cleaning Services: Fees paid to janitorial companies or cleaning staff for daily or weekly office cleaning are deductible. These charges appear on service invoices or payroll records. We enter the amounts based on when you paid them.
• Uniform and Laundry Costs: Expenses for scrubs, lab coats, and laundry services for clinical attire are deductible. The clothing must be required for work and not suitable for everyday wear. We review receipts to verify that the purchases qualify.

When you provide invoices, receipts, and payment records for your dental practice expenses, we match each item with the IRS category it belongs to. Your return reflects the full range of deductible costs tied to operating your practice, and each entry comes from a document you can produce if requested.

Need Help Filing Your Dental Practice Taxes?

To stay compliant, your dental practice needs to establish a system for accurate income reporting, expense categorization, and equipment depreciation. At USA Tax Gurus, our team reviews your practice management reports, equipment purchases, and expense documentation to build a return that reflects your practice’s financial activity. If you have questions or would like to get started, please fill out a contact form or call 213-212-8737 today.

Dental Practice Tax FAQS

How Does Practice Ownership Affect My Taxes?

Solo practitioners, partnerships, and corporations follow different IRS rules for reporting revenue, deducting expenses, and distributing profits. The entity you choose affects your tax rate, self-employment tax obligations, and ability to deduct certain costs.

Here’s how different ownership arrangements work:

• Sole Proprietorship: When you own the practice alone without forming a separate legal entity, you report all income and expenses on Schedule C attached to your personal tax return. Your net profit is subject to both income tax and self-employment tax, which covers Social Security and Medicare. 
• Partnership: When you own the practice with one or more dentists, the practice files Form 1065 and issues Schedule K-1 to each partner. Your K-1 shows your share of practice income, deductions, and credits. You report these amounts on your personal return and pay self-employment tax on your distributive share. Guaranteed payments you receive for services are also subject to self-employment tax.
• S Corporation: When your practice elects S corporation status, the practice files Form 1120-S and issues K-1s to shareholder-dentists. You must receive reasonable compensation through W-2 wages, which are subject to payroll taxes. Distributions beyond your wages aren’t subject to self-employment tax. The IRS scrutinizes S corporation wages to ensure shareholder-employees aren’t avoiding payroll taxes by taking excessive distributions.
• C Corporation: Some practices operate as C corporations, which pay tax at the corporate level before distributing dividends to shareholders. This creates double taxation because shareholders pay tax again on dividends received. C corporations can deduct shareholder-employee wages and benefits, but retained earnings face corporate tax rates.
• Professional Corporations: Many states require dentists to form professional corporations (PCs) instead of standard corporations. PCs follow the same tax rules as S or C corporations, but include additional state-level requirements. We verify that your PC meets both federal and state filing obligations.
• Reasonable Compensation Rules: S corporation shareholder-dentists must pay themselves wages that reflect the value of their services. The IRS compares your wages to industry standards for dentists with similar experience and production levels. When wages are too low compared to distributions, the IRS can reclassify distributions as wages and assess payroll taxes plus penalties.
• Retirement Plan Contributions: Entity type affects how much you can contribute to retirement accounts. Sole proprietors and partners calculate contributions based on net self-employment income. S corporation shareholders base contributions on W-2 wages. We calculate your maximum contribution limit based on your entity and income level.
• Health Insurance Deductions: Self-employed dentists can deduct health insurance premiums on their personal returns, but the deduction is limited to net self-employment income. S corporation shareholders who own more than 2% of the practice must include health insurance premiums in their W-2 wages, then deduct them on their personal return.

When we prepare your practice return, we apply the tax rules that match your ownership arrangement. We calculate self-employment tax for sole proprietors and partners, verify reasonable compensation for S corporation shareholders, and prepare K-1 forms that show the correct income allocation. Your return reflects the entity you chose and the way you compensated yourself during the year.

What Tax Differences Apply to Specialists vs. General Dentists?

Specialists and general dentists follow the same fundamental tax rules, but differences in practice operations, equipment costs, and referral arrangements can affect how income and expenses are reported. Specialists often have higher equipment costs, rely on referrals from general dentists, and bill for procedures with different insurance reimbursement rates. These factors change the expense categories and income tracking that appear on tax returns.

Here’s how specialist practices differ:

• Equipment Costs: Orthodontists purchase brackets, wires, and specialized imaging equipment. Oral surgeons buy surgical instruments, sedation monitoring devices, and cone beam CT scanners. Endodontists invest in microscopes and rotary instrumentation. Periodontists acquire laser systems and bone grafting materials. Each specialty has higher equipment costs than general practices, which increases annual depreciation deductions.
• Lab Fees by Specialty: Prosthodontists send more cases to labs for complex restorations, implant components, and full-arch reconstructions. These lab fees are higher per case than routine crown and bridge work. We track lab invoices by case type to verify that costs match the procedures you performed.
• Referral Fee Arrangements: Some specialists pay referral fees to general dentists who send patients for treatment. The IRS allows these payments as business expenses, but they must comply with state dental board rules and fee-splitting prohibitions. We review your referral agreements to confirm the payments are structured correctly.
• Case Completion Timelines: Orthodontic treatment spans months or years, and revenue arrives in monthly installments. Oral surgery cases may be completed in one visit with payment due immediately. The timing of income recognition varies based on when you receive payment, not when you start treatment. We track your payment schedules to report income in the correct tax year.
• Insurance Billing Differences: Specialists often bill medical insurance in addition to dental insurance, particularly for oral surgery and TMJ treatment. Medical billing requires different documentation and affects how you report income. We review your insurance remittance statements to separate dental and medical reimbursements.
• Facility Fees: Oral surgeons who operate in surgery centers or hospitals may receive facility fees in addition to professional fees. These amounts are reported separately and may follow different billing timelines. We track facility fee statements to include them in your income totals.
• CE Requirements: Specialists have continuing education requirements tied to their specialty certifications. These courses are often more expensive than general dentistry CE and may require travel to specialized programs. We deduct registration fees, travel costs, and materials for courses that maintain your specialty credentials.
• Malpractice Insurance Costs: Specialists face higher malpractice premiums than general dentists because of the procedures they perform. Oral surgeons and periodontists pay the highest rates. These premiums are fully deductible, and we enter them based on your insurance policy statements.
• Office Space Configuration: Specialists may lease smaller offices with fewer operatories because they focus on specific procedures rather than high patient volume. Orthodontists need open bay configurations for monitoring multiple patients. These buildout costs follow leasehold improvement depreciation rules, and we calculate the deduction based on your office layout.

When you provide information about your specialty, equipment purchases, and practice operations, we prepare a return that reflects the costs and revenue patterns typical for your field. Your return includes depreciation schedules for specialty equipment, deductions for higher lab fees, and income reporting that matches how you bill patients and insurance companies.