End of Year Tax Planning

By Dr. Addison Killeen

December 19, 2023

It’s that time when everyone is starting to look at their revenues, their profits, and their tax bill. Sometimes this tax bill is larger than you’ve expected. When that occurs, here’s the top five things in my book to look at to possibly reduce my taxable income:

1. Buy a New Car: For 2023, the limitations are based on the automobile component deduction limits and the weight of the vehicle. The maximum amount that can be deducted for the first year is $20,200 (with bonus depreciation) or $12,200 (without bonus depreciation) for passenger automobiles weighing 6,000 pounds or less: assuming 100% business use.

2. Buy an Electric Vehicle: Looking to go green by purchasing an Electric Vehicle (EV)? You can qualify for a tax credit of up to $7,500, provided the vehicle is assembled in North America and follows a few other rules. Check out Cadillac, Ford, Rivian, Tesla, and Volkswagen for applicable models.

3. Buy Some Equipment or Technology: Need new or used dental or office equipment, furniture, computers, or software? Purchase these items by December 31 and elect to expense (write-off) up to 100% of the cost, up to a maximum of $1,080,000, for immediate savings this year. (Don’t just throw away money- check with our DSN Vendors here for the best price.)

4. Do Some Office Improvements: Did you outfit new office space or make leasehold improvements to your existing space in 2023? If so, have your CPA claim 100% bonus depreciation, allowing you to immediately deduct up to the entire cost of these improvements. Or, if you bought any real estate, make sure you do a cost segregation study to accelerate the depreciation on the asset.

5. Rent Your Home: Through using the Augusta Rule, you can rent your own home from your business. Did you use your personal residence, vacation home, and/or qualifying boat to hold business meetings, staff retreats, training or parties, board of directors, shareholder or retirement plan meetings totaling 14 days or less at each property during 2023? If so, make sure your practice pays you the highest reasonable rent for the use of each property, and claim a practice deduction for the rental paid, while the income you receive personally is tax-free under Section 280A(g).

Following these five tips can help save you a significant amount of money on taxes; but, you should always make sure that this is a part of a larger tax mitigation strategy put together with a qualified accountant or financial advisor. Thankfully, we have many skilled faculty members on Dental Success Network that can help you create a plan and execute for maximum efficiency. I hope this helps makes your holiday season a little brighter!