The tax reform bill passed by Congress earlier this year was the first major overhaul of the tax code in three decades. If you're a dentist, you might be wondering how it could affect you and your practice. Here are some changes worth noting:
Deductions on qualified business income
According to the American Dental Institute, dentists now can deduct 20 percent of qualified business income that "passes through" from a partnership, sole proprietorship or an S corp. However, the more income you earn, this benefit evaporates. If your taxable income is $415,000 or greater (filing jointly) or greater than $207,000 (filing single), the deduction goes away.
You can now deduct the price of equipment and software that you purchase in the year you purchase it. Depreciation limits have increased to $1 million. Bonus depreciation, which had been at 50 percent, was raised to 100 percent for equipment that you bought prior to September 27, 2017. It covers both new and used equipment.
Miscellaneous itemized deductions
These deductions will not be allowable under the new law. They include things like professional services for tax prep and investment advisory. Ask your accountant if you can run these expenses through your practice if you're not already doing so.
State and local tax deductions
The deductions for state and local taxes combined now have a $10,000 limit and include income, sales and property taxes.
Student loan interest deduction
If you're still paying off your dental school loans, there's good news. There was talk that student loan deductions were going away, but you can deduct $2,500 of student loan interest from your taxable income. However, if you make more than $80,000 (filing single) or $165,000 (filing jointly), this deduction goes away.
To find out more about how the new tax laws might affect your business, call us at Harbor West.
This information is provided for general purposes and is subject to change without notice. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. Before acting on any of the information, please consult your Financial Advisor for individual financial advice based on your personal circumstances.