Tax Planning Strategies Every Dentist Should Use in 2025

The 2025 tax law—the most sweeping reform since 2017—delivers major updates to equipment write-offs, business deductions, and tax breaks for healthcare business owners. That means dentists have a fresh set of opportunities to reduce their tax bills, reinvest in their practices, and build long-term wealth.

Below are smart tax strategies every dentist should use to maximize savings this year.

1. Maximize First-Year Equipment Write-Offs (Up to $2.5 Million + More)

Buying equipment just got a lot more rewarding, for real this time.

The 2025 tax law gives dental practices two powerful tools to fully deduct the cost of major equipment the year it’s placed in service—no more waiting five to seven years to depreciate assets. Used together, Section 179 expensing and 100% bonus depreciation can deliver major tax savings in a single year.

Section 179 Expensing: Up to $2.5 Million:

You can now deduct up to $2.5 million of qualifying equipment under Section 179. The deduction begins to phase out when total equipment purchases exceed $4 million and phases out entirely at $6.5 million. This is ideal for small to mid-sized practices planning significant upgrades.

Bonus Depreciation: 100% and Permanent (No Cap)

For equipment placed in service after January 19, 2025, the tax law permanently reinstates 100% bonus depreciation—with no dollar cap. This is especially valuable if you exceed the Section 179 limit or want to deduct used equipment that qualifies under bonus rules.

What Qualifies?

• CBCT scanners and digital X-ray systems

• Sterilizers, dental chairs, and treatment room upgrades

• Imaging and practice management software

Example: Planning to invest in a $120,000 CBCT scanner? Under the old rules, you'd write off about $17,000 per year. Now, you can deduct the full amount in 2025—potentially saving over $30,000 in taxes, depending on your tax bracket.

Important: The equipment must be both purchased and placed in service by December 31, 2025 to count for this year’s deduction.

Town’s healthcare-focused advisors can help you time big investments with your cash flow and practice growth plans—so you get the most out of these powerful tax breaks.

2. Maximize the 20% Business Income Deduction

The 2025 tax law made one of the biggest small business tax breaks permanent—and even more generous. If your dental practice is set up as a sole proprietorship, partnership, or S corporation, you may be able to exclude 20% of your business profit from income tax.

Here’s how it works: let’s say your practice earns $300,000 in qualified business income (QBI). You could deduct $60,000 of that under this rule. If you’re in the 24% bracket, that’s $14,400 in tax savings—just for running your practice efficiently.

But here’s the catch: if you’re operating as an S-Corp, the split between salary and distributions matters.

• Salary = taxed as wages, not eligible for the 20% deduction

• Distributions = eligible for the 20% deduction

Pay yourself too little in salary and the IRS might challenge it. Pay yourself too much and you could miss out on thousands in tax savings.

Town advisors can help you find the sweet spot for dental practice owner compensation—so you don’t leave money on the table or trigger an IRS red flag.

3. Use Advanced Building Write-Off Strategies

If you own your dental office building or have spent significant money on a build-out, you might be sitting on a hidden tax deduction.

Normally, the IRS makes you depreciate building improvements over 39 years. That means a $200,000 remodel would get you a measly $5,100 deduction per year.

But here’s the good news: many dental-specific improvements can be written off over 5, 7, or 15 years instead—dramatically accelerating your tax savings.

Examples that often qualify:

• Specialized plumbing for your operatories

• High-voltage wiring for digital equipment

• Custom cabinetry for instrument storage

• Dental-grade flooring and finishes

This process is called a cost segregation study, and it’s especially powerful when paired with Section 179 or bonus depreciation.

Pro tip: If you renovated your office in the last few years but never did a cost segregation study, you can still catch up on those missed deductions. A lookback cost segregation study lets you identify which parts of your remodel qualify for faster write-offs—and then file Form 3115 to deduct all the extra depreciation in one shot this year. No need to amend prior returns. 

Town can connect you with the right specialists to run the study and handle the paperwork, so you don’t leave tens of thousands in tax savings on the table.

4. Maximize Retirement Savings Opportunities

The right retirement plan can do double duty—help you build long-term wealth and slash this year’s tax bill. The more your practice earns, the more you can shelter.

Solo or Small Practice?

If you’re a solo dentist (or just work with a spouse), a Solo 401(k) lets you contribute both as the employer and employee—potentially over $70,000 per year. That could mean $17,000–$20,000 in tax savings depending on your income and state.

Pro tip: Hire a spouse or child (age 7 or older) and pay them a reasonable wage. This not only helps shift income into a lower bracket—it also lets them contribute to a Roth IRA or 401(k), adding more to your family’s overall retirement savings.

High-earning practice?

If your dental practice clears $400,000+ in profit, a cash balance pension plan could be a game-changer. These are IRS-approved defined benefit plans that let you contribute $100,000–$250,000+ annually, depending on age and income.

That could mean $50,000+ in tax savings every year—plus a rapidly growing retirement nest egg. These work great when paired with an existing 401(k), and they can often be set up even late in the year.

Town advisors can help you design a retirement setup that fits your income, payroll, and timeline—and connect you with plan administrators who know how to work with healthcare practices.

5. Claim Healthcare-Specific Tax Credits

Don't miss out on tax credits that are tailor-made for practices like yours. Several healthcare-specific incentives can significantly lower your tax bill—but many go unclaimed because they’re buried in IRS fine print.

Here are a few your dental practice might qualify for:

Small Business Health Care Tax Credit -  Covers up to 50% of health insurance premiums—but only for practices with fewer than 25 full-time equivalent employees and average wages under $56,000. If your team is small and you offer coverage, this one's worth checking.

Work Opportunity Tax Credit (WOTC) -  Provides up to $2,400–$9,600 per hire for employing workers from targeted groups (such as veterans or long-term unemployed individuals). If you’re growing your team, this is a sleeper credit worth planning for.

Disabled Access Credit -  Covers 50% of accessibility improvements—like ADA-compliant entrances, exam rooms, or restrooms—up to $10,250 in expenses. This applies whether you're updating your space or outfitting a new one.

Energy Efficiency Credits  - Office lighting upgrades, HVAC systems, and certain building improvements may still qualify for energy-related tax incentives—but these are phasing out fast under the new law.

Town can help you identify which credits your practice actually qualifies for and make sure they’re claimed properly. These are often missed unless your advisor understands the unique setup of a dental office.

6. Work Around State Tax Limits

If you practice in a high-tax state like California, New York, or New Jersey, this is a rare opportunity to cut your federal tax bill.

The 2025 tax law temporarily raises the cap on state and local tax (SALT) deductions from $10,000 to $40,000—a huge jump for dentists in high-income tax states. That means you may now be able to deduct significantly more of what you’re already paying in state taxes.

But there’s a catch: this expanded deduction is only available to taxpayers with modified adjusted gross income under $500,000. Once you pass that threshold, the benefit phases out quickly. And the whole thing sunsets after 2029—so this is a limited-time window.

If you’ve been stuck at the $10,000 cap for years, this change could make a noticeable difference in your 2025 return.

Town can help you evaluate how much of this new deduction applies to you—and how to plan around the income phaseout if you're close to the edge.

7. Offer Tax-Free Fringe Benefits That Also Help You

Want to give yourself or your team more without increasing taxable wages? Fringe benefits are a powerful way to do it—if structured correctly.

Using an accountable plan, your practice can reimburse certain work-related expenses that are:

• Tax-free to employees, and

• Fully deductible to the practice

Examples that work well in dental settings:

• Mobile phone plans and internet used for work

• Professional subscriptions or dental CE platform access

• Ergonomic equipment like standing desks, chairs, and monitor arms

• Blue-light glasses or anti-fatigue mats for clinical staff

• Home office tools for off-site or administrative team members

These benefits can boost morale, improve performance, and reduce payroll tax costs—without triggering income tax for the recipient (when documented properly).

New for 2026: In-office meals, snacks, and lunch meetings will no longer be deductible starting January 1, 2026—unless they qualify as part of taxable compensation. So if you’re providing meals as a staff perk, it may be time to rethink how you offer that benefit.

Pro tip: These same benefits can apply to you as the owner, too—just be sure to document usage and apply the plan consistently. Town can help you identify eligible fringe benefits and guide your team on how to document them properly to stay compliant with IRS rules.

8. Write Off Practice Innovation Costs (If They're U.S.-Based)

Here’s a hidden gem: you can fully deduct certain innovation-related expenses—if they happen on U.S. soil.

The 2025 tax law makes U.S.-based research and experimental (R&E) costs immediately deductible again.

That’s a big change from prior rules that required you to spread those deductions over five years. But there’s a catch: foreign R&E must still be amortized over 15 years.

So, what qualifies as R&E in a dental practice? You might be surprised:

• Developing custom patient education tools or tech

• Testing out a new digital workflow across your operatories

• Creating software to improve case tracking, billing, or communication

• Trying a new service delivery model (e.g., mobile hygiene units or AI-based diagnosis tools)

The IRS definition is broader than you’d think—as long as it’s systematic, U.S.-based, and aimed at improving a product or process, it might qualify.

Not sure if your innovation efforts count? A Town advisor can help assess and document them before year-end.

9. Sell Your Practice Without Paying Taxes on the Gain

If you are thinking about selling your practice in the next 5–10 years, the 2025 tax law makes it possible to eliminate or reduce federal taxes on the sale—if you plan ahead.

Here’s how: If your practice is structured as a C-corporation and you meet certain requirements, you may qualify for the Qualified Small Business Stock (QSBS) exclusion under Section 1202. This powerful tax break lets you exclude part—or even all—of your gain when you eventually sell.

Under the 2025 updated law, you can also exclude:

• 50% of your gain if you hold the stock for at least 3 years

• 75% if you hold it for 4 years

• 100% if you hold it for 5 years or more

Also new: the total gain exclusion cap increases to $15 million per shareholder (up from the previous $10 million), with annual inflation adjustments. This higher limit only applies to QSBS issued on or after July 4, 2025.

Key requirements:

• You must own C-corp stock issued on or after July 4, 2025, to qualify for the new tiered exclusion: 50% after 3 years, 75% after 4 years, and 100% after 5 years. (Stock issued before that date still requires a 5-year hold and follows older QSBS rules.)

• The company must have less than $75 million in assets at issuance

• You must be the original owner of the stock

• The stock must be held continuously for 3+ years

Example:
You set up a new C-corp in late 2025, and sell the practice in 2029 for a $2 million gain. Since you held the stock for four years, you could exclude 75% of that gain—$1.5 million tax-free.

This strategy won’t work for S-corps or LLCs, so if an exit is on the horizon, it may be worth considering a C-corp conversion—especially if you're planning to sell in 3–5 years.

Town’s advisors can model the savings and help you decide whether the QSBS path fits your long-term plan.

10. Use Continuing Education Deductions

You need continuing education to maintain your license. The IRS lets you deduct it—so don’t leave those write-offs on the table.

“Dental professionals need ongoing education to maintain their licenses, but most pay out of pocket without realizing these expenses are fully deductible business costs,” says Jess Holt, Senior Tax Manager at Town.

What’s deductible:

• Course registration fees

• Certification programs and required materials

• Travel and lodging to attend in-person courses

• 50% of meals during educational events

Example:
You attend a three-day implant training in Chicago. The $3,500 course fee? Deductible. Your $800 flight and $600 hotel? Also deductible. Add meals, and that weekend could generate $4,000+ in tax deductions, potentially saving you over $1,000.

Keep in mind: Track all receipts, note the business purpose, and document the dates. Good records turn CE into real savings.

This applies to hands-on workshops, dental conferences, online CE, and specialty training. If it helps maintain or improve your skills as a dental professional, it’s probably deductible.

11. Deduct Speaking Engagement Expenses

If you present at dental conferences, webinars, or professional events, you’re likely missing out on a valuable deduction.

When you speak on behalf of your practice—whether it's a breakout session at a state meeting or a CE webinar—you’re marketing your business and building professional credibility. The IRS recognizes that as a legitimate business activity, which means your related expenses are deductible.

What you can deduct:

• Travel to and from the event

• Lodging and 50% of meals while attending

• Presentation materials or handouts

• Equipment used for live demos or AV needs

Example:
You fly to Las Vegas to speak at a dental conference. Your $550 flight, $900 hotel, and on-site meals are all business deductions—as are the materials you print or tech you buy to support your session.

Pro tip: Save emails confirming your speaker role, a copy of the event program, and all related receipts. The clearer the paper trail, the stronger your deduction.

Speaking is great marketing—but it can also lower your tax bill when documented properly.

How Town Transforms Dental Practice Tax Planning

Traditional accounting firms treat your dental practice like any other small business. They may miss the nuances of equipment depreciation schedules, don't understand healthcare compliance requirements, and have no idea how dental practice growth actually works.

Town is different. Our team understands the unique needs of dental practices and brings experience that goes beyond general small business tax prep:

• Industry-Informed Expertise: Your Town advisor knows that a CBCT scanner depreciates differently than a waiting room sofa, which leasehold improvements may qualify for faster write-offs, and how tax strategy shifts when you expand your hygiene team or upgrade operatories.

• Year-round Partnership: Most CPAs go quiet after April 15. We don’t. Town checks in quarterly to help you plan for equipment purchases, income timing, and tax-saving opportunities as they come up. Thinking about that $120,000 CBCT scanner in November? We’ll help you decide if buying it now—or waiting until January—makes more financial sense.

• Proactive, Strategic Planning: We don’t just file returns. We flag tax impacts before you make big decisions—like opening a second location, restructuring your entity, or bringing on an associate. You’ll never be left wondering how a move might affect your tax bill.

• Unlimited, On-Demand Support: You get unlimited calls, texts, and emails with your advisor. Whether you're evaluating a practice acquisition, planning your retirement, or just wondering if a business meal is deductible, you don’t have to wait for a quarterly meeting—or a surprise invoice.

Take Action Before Year-End

Most of these strategies only work if you act before December 31st. Miss the window, and you're stuck with the tax bill the IRS calculates for 2025—no do-overs.

Town's tax specialists live in this world daily. Whether you're running a solo practice or managing a growing group, we’ll help you spot what applies, what to prioritize, and what needs to happen before the year wraps.

Contact Town today to schedule your year-end tax planning session and make the most of these new 2025 opportunities while there’s still time.

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Disclaimer: This content is for educational purposes only and does not constitute personalized tax advice. Tax laws are complex and subject to change. Individual circumstances can vary significantly, and strategies that work for one taxpayer may not be suitable for another.