This past December, President Trump signed the Tax Cuts and Jobs Act into law, initiating the biggest overhaul to the U.S. tax code in almost 30 years. This is not an all-encompassing review of tax reform but covers certain key items that could impact you and your dental practice. In general, many of the items related to businesses are permanent changes to tax law, where the individual tax law changes often only apply from 2018 to 2025.

You should consult with your tax professional to determine how you can best take advantage of these tax law changes.

At a very high level, the most significant changes included:

• Lower top rates for individuals
• Millions more Americans will take standard deduction
• Lower top rate for businesses (C corp)
• New deduction for pass-through businesses (S corp and partnership)

This is one action that every dental practice should take. Because of changes made to the top tax rate for C corporations, along with new deductions for S corporations, now is the time for every dental practice to revisit their entity structure.

These 2018 provisions allow for a deduction for 20 percent of qualified pass-through business income, subject to certain exclusions, limitations and phase-outs. Many S corp practices will qualify for this deduction, but high producing practices will likely phase out of any benefit.

In recent years, the majority of dental practices were established initially as LLCs (Limited Liability Corporations) and then converted to S corps when the timing was beneficial from a tax perspective. With the drop in the C corp tax rate from 35 percent to 21 percent, an S corp may not always make sense.

The best entity structure can only be determined with an in-depth analysis conducted by a tax professional, as there are many practice-specific variables that come into play (e.g. profitability, income growth expectations and succession planning).

The recent tax code changes will impact everyone, from both a business and personal tax perspective. Meet with your tax professional now to ensure that you are strategizing what will provide you with the maximum benefit.