Taxes are one of the largest line items in a practice owner’s financial life, and most of the opportunity is in planning ahead — not in what your CPA can do the following April. Here’s how proactive tax planning works.
Why does proactive tax planning matter so much for dentists?
By the time a return is being prepared, most of the year’s decisions are already locked in. Proactive planning — made before year-end and across multiple years — is where entity structure, retirement contributions, and income timing can be coordinated to reduce lifetime tax, not just this year’s bill.
What are the main tax levers for practice owners?
- Entity structure and reasonable compensation (see S-corp vs sole proprietor).
- Retirement plan design, including cash balance plans, for large deductions.
- Timing of income, bonuses, and major equipment purchases.
- Where you hold investments (asset location) and how gains are realized.
How do planning and tax prep fit together?
Tax-aware financial planning and tax preparation are different jobs. A financial advisor builds tax awareness into decisions across your whole picture; your CPA prepares and files the returns. The best outcomes come when they coordinate rather than work in separate silos.
Frequently asked questions
Through proactive, year-round planning: appropriate entity structure and reasonable compensation, retirement-plan design, income and expense timing, and tax-aware investing — coordinated with your CPA. There are no guarantees, and strategies must fit your situation.
It depends on your income, state, and payroll. An S-corp can reduce certain taxes for some owners but adds complexity and requires reasonable compensation. Model it with your CPA and advisor.
Founder & Financial Planner · Investment Adviser Representative · Series 63 & 65
Ian McGinnis is a financial planner and founder of Dental Wealth Partners, a non-commission, fee-only financial planning firm for dentists. He is the author of The Wealthy Dentist: Smarter Money. Less Stress. More Life. and hosts the Smiles & Cents podcast.
Keep reading
- S-corp vs. sole proprietor for dentists: which is better?How choosing an S-corporation affects a dentist’s taxes, payroll, and paperwork — and when the added complexity is worth it.
- Cash balance plans for dentists, explainedHow high-income dental practice owners can use a cash balance plan to shelter more than a 401(k) allows — and how to tell whether it fits.
- Retirement plans for dental practices, comparedA comparison of 401(k), safe harbor, profit sharing, SEP-IRA, and cash balance plans for dental practice owners — and how to choose.