Tax planning for dentists starts before you buy a practice, because the price allocation sets your deductions for 15 years.
When you buy a dental practice’s assets, the price is split among them, and the tax rules differ by asset. Equipment acquired after January 19, 2025 can be deducted in full in the year you start using it, with 100% bonus depreciation. Goodwill, the patient base and the seller’s noncompete are Section 197 intangibles, amortized evenly over 15 years.
Updated · Sources
Dental practices, tax year 2026
- 100%
- of the cost of qualifying equipment is deductible on your federal return in its first year, used equipment included.
- 15 years
- is the schedule for goodwill and a noncompete, counted from the month you buy.
- $2,560,000
- is the most you can expense under Section 179 in 2026, if your business income and wages cover it.
Any Section 179 amount your income cannot cover carries forward to the next year.
Can you deduct a dental chair in the year you start using it?
Acquired after January 19, 2025
The 2025 tax law, P.L. 119-21, made 100% bonus depreciation permanent for property acquired after January 19, 2025. If you signed a written binding contract for equipment on or before that date, it counts as acquired on the contract date. That equipment does not get the 100% rate.
New to you, even if used
Used equipment, such as the chairs and imaging you buy from a retiring dentist, qualifies for bonus depreciation. It qualifies only if you never used it before the purchase.
Bought from an unrelated seller
Used equipment bought from a related party gets no bonus depreciation. Neither does used equipment you take on at the seller’s tax basis, rather than at the price you paid.
A recovery period of 20 years or less
Bonus depreciation covers equipment and other property depreciated over 20 years or less, plus certain software. Goodwill and the other Section 197 intangibles never qualify.
These tests are federal. California’s income tax allows no bonus depreciation.
How much of a $1.2 million practice purchase can you deduct in 2026?
In an asset purchase, Section 1060 makes buyer and seller split the price by the residual method. Each class of assets gets up to its fair market value, and whatever is left goes to goodwill. A written allocation you both sign binds each of you, unless the IRS finds it inappropriate. You each report it on Form 8594.
Equipment in 2026
$300,000
Bonus depreciation deducts all of it.
Goodwill in 2026
$30,000
Only six months of amortization fall in 2026.
First-year total
$330,000
That is 27.5% of the price.
Each year from 2027
$60,000
The goodwill is amortized at this rate until mid-2041.
The $900,000 covers goodwill, the patient base and a five-year noncompete. Section 197 spreads it evenly over 180 months, which is $5,000 a month, or $60,000 in each full year. The equipment passes all four bonus depreciation tests above, so it gets the full 100%. Electing Section 179 instead would give the same $300,000, subject to its income limit. All figures are federal deductions from taxable income.
A 1099 associate can deduct job costs a W-2 associate cannot, but pays both halves of Social Security and Medicare.
Tax deductions for dentists who work as associates depend on whether the practice pays you on a W-2 or a 1099. A 1099 associate who is truly an independent contractor is self-employed for tax. As a sole proprietor, you deduct costs such as continuing education and malpractice insurance on Schedule C.
| W-2 associate | 1099 associate | |
|---|---|---|
| Your own costs | Not deductible Your practice may repay them | Deductible On Schedule C, against your 1099 pay |
| Payroll tax | 7.65% Your share, withheld from pay | 15.3% Self-employment tax on 92.35% of profit |
| QBI deduction | None Wages do not count | Up to 20% of profit Phased out at the top |
| Tax during the year | Withheld by the practice | Estimated tax Four installments, the first due April 15 |
The Social Security part, 6.2% for employees and 12.4% for the self-employed, stops at $184,500 of 2026 earnings. An extra 0.9% Medicare tax applies above $200,000 of earnings, or $250,000 on a joint return. Hygienists and assistants on a W-2 cannot deduct unreimbursed job costs, the same as a W-2 associate. P.L. 119-21 made that rule permanent.
Owning a practice brings six tax rules dentists often miss.
A short noncompete still takes 15 years
The seller’s covenant not to compete is amortized over 15 years, even if it lasts only three. Nothing is written off when it expires. The Code keeps it on the schedule until you dispose of the whole practice.
Dentistry counts as health for the QBI deduction
The QBI regulations name dentists in the field of health, so a dental practice is a specified service business. Its 20% QBI deduction phases out at the same 2026 thresholds as a medical practice.
A low S corporation salary has two costs
If your S corporation pays you below a reasonable salary, the IRS can reclassify distributions as wages and collect payroll tax on them. A low salary also limits profit sharing, because the practice can deduct contributions only up to 25% of participants’ pay. If you are the only participant, a $150,000 salary caps the deduction at $37,500.
A partner’s guaranteed payments are not QBI
If your group practice files as a partnership, a guaranteed payment for your work is not QBI. An S corporation salary is excluded the same way. The payment is still self-employment income, and the practice deducts it.
Last year’s tax can set this year’s payments
When income jumps after you buy a practice, base your estimated payments on last year’s return. Paying 100% of last year’s tax avoids the federal penalty, or 110% if that year’s AGI was over $150,000 ($75,000 married filing separately). Pay it in four equal installments, on time.
A dental corporation’s stock gets no gain exclusion when you sell
The QSBS exclusion never applies to stock in your dental corporation, however long you hold it. Section 1202 excludes businesses in the field of health.
Plan the purchase with a CPA before you sign, and file with the same team every year after.
Valim’s CPAs plan the tax side of practice purchases and equipment deductions for dentists. We file dentists’ federal and state returns in all 50 states.
- We review the price allocation before you sign, and plan the practice’s profit sharing each year, as part of Tax advisory.
- We compare an S corporation with your current setup, payroll costs included.
- We set your quarterly payments once you own the practice.
- We file the practice’s return and yours from your bookkeeper’s year-end books, plus Form 8594 in the year you buy.
- We answer any IRS or state notice on a return we prepared, within your fee.
- Business return
- from $495
- Individual return
- from $195
We quote a flat fee before work starts. We do not bill hourly.
Dentists’ tax planning questions.
What are some tax loopholes for dentists?
The main tax strategies for dentists are written rules, and several come with buying a practice. Equipment bought with the practice can be expensed in its first year, and purchased goodwill is amortized over 15 years. A 401(k) with profit sharing lets the practice add to your own deferrals. Your share of practice profit can also get the 20% QBI deduction. At or below $403,500 of joint taxable income in 2026, the limit for health businesses does not reduce it.
How do you deduct the cost of buying a dental practice?
When you buy a practice’s assets, you deduct the price asset by asset, following the allocation you and the seller sign. The share allocated to equipment can be written off in its first year, with 100% bonus depreciation or Section 179. The share allocated to goodwill, the patient base, the staff you keep on and the seller’s noncompete is amortized over 15 years. Buyer and seller each report the allocation to the IRS on Form 8594.
How much can a dentist put into a 401(k) in 2026?
In 2026, a dentist’s 401(k) can take up to $72,000 from all sources before catch-ups, or 100% of pay if less. At 45, an owner paid $300,000 by an S corporation can defer $24,500, leaving $47,500 for the practice to add. The same owner at 61 gets the larger catch-up for ages 60 to 63, $11,250, which raises the total to $83,250. That catch-up must be Roth if the owner’s 2025 wages from the practice topped $150,000. A cash balance plan can add more, because the law caps the pension it pays and an actuary sets the contribution.
Sources
- 26 U.S.C. § 197, Amortization of goodwill and certain other intangibles
- 26 U.S.C. § 168, Accelerated cost recovery system (bonus depreciation)
- 26 C.F.R. § 1.197-2, Amortization of goodwill and certain other intangibles
- 26 U.S.C. § 179, Election to expense certain depreciable business assets
- 26 C.F.R. § 1.179-2, Limitations on amount subject to section 179 election
- Cal. Rev. & Tax. Code § 17250 (bonus depreciation does not apply)
- 26 U.S.C. § 1060, Special allocation rules for certain asset acquisitions
- IRS, Instructions for Form 8594
- IRS, Rev. Proc. 2025-32 (2026 inflation adjustments)
- 26 U.S.C. § 199A, Qualified business income
- 26 C.F.R. § 1.199A-5, Specified service trades or businesses
- 26 U.S.C. § 1202, Partial exclusion for gain from certain small business stock
- 26 U.S.C. § 707, Transactions between partner and partnership
- IRS, S corporation compensation and medical insurance issues
- 26 U.S.C. § 1401, Rate of tax on self-employment income
- IRS, Publication 15 (2026), Employer’s Tax Guide
- 26 U.S.C. § 67, 2-percent floor on miscellaneous itemized deductions
- 26 C.F.R. § 1.62-2, Reimbursements and other expense allowance arrangements
- 26 U.S.C. § 6654, Failure by individual to pay estimated income tax
- 26 U.S.C. § 404, Deduction for contributions of an employer to an employees’ trust or annuity plan and compensation under a deferred-payment plan
- 26 U.S.C. § 414, Definitions and special rules (catch-up contributions)
- 26 U.S.C. § 415, Limitations on benefits and contribution under qualified plans
- IRS, Notice 2025-67 (2026 retirement plan limits)
Reviewed and updated September 2026. General information, not advice for your situation.