Running a profitable orthodontic practice isn’t just about generating revenue—it’s about keeping as much of it as possible after taxes. Poor tax planning can lead to unnecessary expenses, audits, and financial stress, while a smart strategy can significantly improve your bottom line.
This chapter will cover key tax strategies for orthodontists, how to maximize deductions, and when to hire a CPA to ensure your finances are optimized for long-term success.
Smart Tax Planning for Orthodontists
Tax planning is not something you should only think about at the end of the year—it should be a year-round strategy that helps you make smarter financial decisions. A well-structured tax plan ensures that you:
Pay the least amount of taxes legally possible
Avoid penalties, audits, and compliance issues
Maximize deductions and reinvest in your practice
Plan for long-term financial growth
Key Tax Strategies for Orthodontists:
Choose the Right Business Structure: Your tax obligations depend on whether your practice is an S-corp, C-corp, LLC, or sole proprietorship. Many orthodontists elect an S-corp to reduce self-employment taxes while still receiving the benefits of a corporation.
Pay Yourself a Strategic Salary: If you have an S-corp, you must pay yourself a “reasonable salary” to avoid IRS scrutiny. However, structuring your income between salary and distributions can lower your tax liability.
Utilize Retirement Plans: Maxing out contributions to 401(k)s, IRAs, or SEP-IRAs not only prepares you for the future but also reduces your taxable income.
Plan for Quarterly Tax Payments: Instead of waiting until April, orthodontists must pay estimated taxes quarterly to avoid penalties. Work with a CPA to calculate these amounts accurately.
Without proactive tax planning, you’re leaving money on the table and exposing yourself to potential IRS issues.