Five year-end tax moves dental practice owners shouldn't miss

Here are five areas worth understanding. For each one, we've covered how it works, the rules that matter, and the tradeoffs that tend to get left out.

1. Tax-loss harvesting

If an investment in a taxable brokerage account is worth less than you paid for it, you can sell it and "realize" the loss. That loss first offsets any capital gains you’ve realized this year. If your losses are larger than your gains, generally up to $3,000 can offset ordinary income, including income from the practice. Anything left over carries forward to future years and doesn’t expire.

A few rules matter here:

• It only applies to taxable accounts. Losses inside a 401(k), IRA, or cash balance plan don’t count.
• The wash-sale rule disallows the loss if you buy the same or a "substantially identical" investment within 30 days before or after the sale. That includes purchases in your spouse’s accounts and your IRAs. Automatic dividend reinvestment can trigger it without you noticing.
• The usual approach is to sell and immediately buy something similar but not identical, such as a different fund covering a similar part of the market, so you stay invested the whole time.
• Trades need to be completed by December 31 to count for 2026.

The tradeoff is that harvesting lowers your cost basis, so more of the gain shows up when you eventually sell the replacement. In most cases it’s a deferral rather than a permanent saving. That’s still worth doing when you’re in a high bracket now and expect a lower one later, but it’s worth less in a year when your income is already low.

2. Charitable giving

How you give often matters as much as how much you give.

• Appreciated investments instead of cash. If you’ve held an investment for more than a year and it has grown, giving the shares directly generally lets you deduct the full market value and avoid capital gains tax on the growth. You can then use the cash you would have given to buy similar investments at a new, higher cost basis.
• Donor-advised funds and "bunching." With a high standard deduction, many households get no tax benefit from their annual giving. Putting two or three years of planned gifts into a donor-advised fund in one year can push you over the standard deduction that year, and you can recommend grants to charities over time. The contribution is irrevocable, so it only fits money you’re sure you’ll give.
• Rule changes for 2026. Tax law changes affecting charitable deductions took effect in 2026. Confirm the current rules for itemizers, non-itemizers, and donor-advised fund contributions with your CPA, as these rules depend on your full return and income level.

Gifts need to be completed by December 31, and transfers of stock can take a week or more to settle, so earlier is better. Because these rules depend on your full return, larger gifts are worth reviewing with your CPA before you make them.

3. Coordinating practice and personal accounts

For practice owners, some of the most valuable year-end decisions sit where the practice and household overlap.

• 401(k) timing. Your employee deferrals generally have to come out of payroll by December 31. Employer profit-sharing contributions can usually be made up to the practice’s tax filing deadline, including extensions. Confirm the 2026 employee deferral limit and catch-up contribution rules with your plan administrator or the IRS, as these limits are updated annually.
• Roth catch-up requirement. Confirm with your plan administrator whether a Roth-only catch-up rule applies to your situation in 2026 and what income thresholds trigger it.
• S-corporation salary. If your practice is an S corporation, retirement contributions are based on your W-2 salary, not your distributions. The salary that minimizes payroll tax isn’t always the one that gets the most out of your retirement plan, and any change has to run through payroll before year-end. Coordinate this with your CPA.
• Cash balance plans. These can allow larger deductible contributions for owners, usually those in their late 40s or older with steady profits. They come with required annual contributions and added employee costs, so they fit some practices and not others (see cash balance plans explained). Confirm eligibility and rules with your plan administrator.
• Idle cash. It’s common to see a large balance in the practice operating account and a separate emergency fund at home, both earning very little. Deciding how much cash the practice actually needs often frees up money for debt payoff or investing.

4. Cost segregation and tax credits

These come up often in dental circles, and they’re worth understanding even if they don’t end up fitting you.

Cost segregation. If you own your practice building, the IRS generally has you depreciate it over 39 years. A cost segregation study is an engineering analysis that separates out the parts of the building with shorter lives. That includes plumbing and electrical dedicated to operatories, cabinetry, specialty lighting, flooring, and site improvements like parking, which can often be depreciated over 5, 7, or 15 years instead. Confirm the current bonus depreciation rules and placed-in-service requirements with your CPA or the IRS before ordering a study. If you bought your building in a prior year, a "look-back" study may capture depreciation you missed, but this depends on your specific situation.

A few things decide whether it’s worth doing:

• How the building is held. Most dentists own the building in a separate entity that leases it to the practice. Rental losses are generally passive, and special rules apply when you rent to your own practice. Whether the deduction offsets your practice income or just carries forward depends on how the building and practice are owned and grouped for tax purposes, which needs to be settled with your CPA before you order a study.
• Recapture. Faster depreciation now generally means more tax when you sell, and some of it is taxed at higher rates than ordinary capital gains. It works best when you plan to hold the building for a long time, or when the tax rate you save at today is higher than the one you’ll pay later.
• The study cost. On smaller buildings, the fee can eat up much of the benefit.

If you lease your space, the same idea can apply to your build-out. Interior improvements to a leased space often qualify for faster depreciation, which is worth knowing before you sign a lease or start a remodel.

Tax credits. A deduction reduces your taxable income, so it saves you your tax rate on each dollar. A credit reduces the tax itself, dollar for dollar, which makes the right credit worth more than a deduction of the same size. Confirm the availability and amounts of any credits you’re considering with your CPA, as credit rules and limits change annually.

5. A plan for 2027

A budget is part of this, but the more useful conversation is about what you want the practice and your personal finances to do for you next year.

• Estimated taxes. Confirm the due date for your fourth-quarter estimated payment and the safe-harbor rules for avoiding underpayment penalties with the IRS or your CPA. The rules depend on your income level and prior-year tax, and 2026 guidance should be verified against the IRS Form 1040-ES instructions when issued.
• Equipment purchases. Confirm the current bonus depreciation and Section 179 rules with your CPA before making equipment purchases. Keep the math in view, though. In a high bracket, a $100,000 purchase might save roughly $35,000 to $45,000 in tax, which still leaves $55,000 or more spent. It’s a good decision when the practice needs the equipment, not just the deduction.
• Targets for next year. Savings rate, debt payoff priorities, retirement plan contributions, and how many days you want to be practicing are easier to hit when they’re set before January rather than after.

None of these are emergencies, but several come with hard deadlines. If you’d like to walk through which ones apply to your practice, you can schedule a call with our team. When it makes sense, we’re glad to coordinate with your CPA so the tax pieces line up with the rest of your plan.