Year-End Tax Moves for Dental Practices: What to Do Before December 31, 2026

By Spiro Leunes, CPA | CEO, MRL Advisory Group – New Jersey and New York Dental CPAs

As of October 4, 2026. Tax law changes frequently, and the rules, limits and deadlines described below may not be in effect when you read this.

Every December I get the same phone call. A practice owner has just looked at a tax projection for the first time all year, the number is bigger than expected, and he wants to know what he can still do about it. The answer is always the same. Less than he could have done in October.

So this is the October post. I wrote in the mid-year checkup that by filing time the game is over. By the second week of December it is nearly over. Most of the moves that reduce a dental practice owner's tax bill have to happen before year-end. Equipment has to be placed in service. Payroll decisions have to be made. State pass-through taxes may need to be paid. Retirement plan decisions have to be made while there is still time to carry them out properly.

I covered what changed under the 2025 federal tax law in 2026 dental tax planning. This post is about execution. Here is what I would do, in order, with the weeks that are left.

One note before we start. The numbers below are the federal, New Jersey and New York rules as I read them in October 2026. Your facts, your entity and your state change the answer, and several of these moves need your attorney or your plan administrator in the room along with your CPA.

1. Start With a Real Projection, Not a Guess

Nothing else on this list makes sense until you know where you stand, and that means a projection built on KPIs you actually track, not a guess from the bank balance. Pull the P&L through September, add the fourth quarter you actually expect, and run taxable income for the practice and for you personally.

The owners who skip this step make one of two mistakes. They buy equipment they do not need to shelter income that was never going to be taxed at the rate they feared. Or they do nothing, get surprised by a large balance due, and tell me in April that the practice did better than they realized.

What the projection has to include. Collections and expenses under the practice's tax accounting method, which for most practices means cash. Loaded payroll, including the raises you gave this year, which I covered in how to structure staff pay. Owner compensation and distributions. Retirement contributions. Equipment already placed in service. Other business and investment income. And your spouse's income if you file jointly, because the thresholds that drive the qualified business income deduction and the SALT cap are measured on the whole return, not the practice.

Then check your estimates. The fourth quarter federal individual estimate for a calendar-year taxpayer is due January 15, 2027. New Jersey's fourth quarter individual estimate is due the same day. If the practice outperformed, your April balance may be far larger than you expect. That does not automatically mean a penalty, because the prior-year safe harbor may protect you, but you still need to know what is coming. If an associate left, or you dropped a large PPO in the middle of the year, you may be sending the government cash the practice could use. Review the remaining payments now.

A good projection takes an afternoon, provided the books are clean. If they are not, that is the first project, and it is also the first thing that catches a problem in the practice's cash. It saves you from every expensive mistake in the rest of this article.

2. Equipment: Placed in Service Means Placed in Service

The 2025 federal law permanently restored 100 percent bonus depreciation for qualifying property acquired and placed in service after January 19, 2025. For 2026, the federal Section 179 limit is $2,560,000. That limit shrinks dollar for dollar once the total cost of Section 179 property placed in service in the year passes $4,090,000, and the taxable income limitation and the other Section 179 rules still apply. Section 179 covers tangible personal property used in the practice, so a CBCT, an intraoral scanner, chairs, computers and software all qualify, along with qualified improvement property and roofs, HVAC, fire and security systems on a nonresidential building. Bonus depreciation uses a different test, property with a recovery period of 20 years or less, which is why the two do not always cover the same items. A new operatory or a buildout has to be analyzed component by component. The whole construction invoice does not automatically become a first-year deduction. That is a powerful tool, and it is the one owners misuse most often in December.

Placed in service is the test, not ordered and not paid for. A scanner sitting in a crate on December 30 is not placed in service. An operatory that is framed but not wired is not placed in service. If you want the 2026 deduction, the equipment has to be delivered, installed and ready to use before midnight on December 31. Call the vendor now and get a delivery date in writing. If it cannot arrive in time, it is a 2027 deduction, and that is fine. Just do not plan your 2026 taxes around it.

Never spend a dollar to save thirty-five cents. I said this in June and I will say it again. Buy the CBCT because it adds implant cases and lets you keep procedures in-house. Buy the scanner because it shortens the appointment and improves case acceptance. The deduction is the bonus. It is not the reason.

Bonus or Section 179? They are not the same. Section 179 is elected asset by asset and is limited by taxable income and by the investment phase-out. Bonus depreciation has no dollar limit and can create or deepen a loss. Whether you can actually use that loss this year depends on basis, at-risk, passive loss and the excess business loss rules, which are now permanent. Sometimes I use 179, sometimes bonus, often both. That decision comes after the projection, not before it.

Now the part that surprises every New Jersey and New York owner. The federal deduction is not the state deduction, and the two states handle it very differently.

New Jersey has never followed federal bonus depreciation, and for gross income tax purposes it caps Section 179 at $25,000. A $200,000 CBCT that disappears from your federal income in 2026 reduces your New Jersey income by a fraction of that this year. The rest is added back and depreciated the slow way on the New Jersey return. New Jersey also has no equivalent of the federal 20 percent qualified business income deduction, and an S corporation election that saves federal payroll tax saves nothing on New Jersey gross income tax, which runs as high as 10.75 percent. Model the New Jersey result separately.

New York State is the better state for equipment buyers, but only if you pick the right tool. New York does not follow federal bonus depreciation for most property placed in service on or after June 1, 2003, and it requires an add-back. But New York State does follow federal Section 179. There is no general New York State Section 179 add-back. It follows the federal election, the qualifying property rules, the $2,560,000 limit, the $4,090,000 investment phase-out and the taxable income limitation. An amount disallowed by the income limitation carries forward. The election is made on the federal return and can be revoked under the federal procedures, but a revocation is permanent.

So for a New York dentist, Section 179 is the state lever. A $200,000 qualifying CBCT expensed under Section 179 comes off the federal return and the New York return. The same CBCT taken as bonus depreciation comes off the federal return only and is depreciated over its normal life in New York. That is why I compare the two before deciding how to expense a purchase, and it is why the answer in Manhattan is often different from the answer in Morristown.

The New York SUV exception. New York State requires an add-back of the federal Section 179 deduction on an SUV that is not a passenger automobile under Section 280F, unless the taxpayer is an eligible farmer, with a subtraction for the related federal recapture when it applies. Buying a heavy SUV in December does not mean the federal deduction carries over to New York.

New York City needs its own calculation. For the city's business corporation tax, general corporation tax and unincorporated business tax, special Section 280F-based limits apply to SUVs regardless of weight, subject to the applicable definitions and exceptions. A deduction allowed federally and for the state may still need a separate city adjustment. City practices model all three.

The practical rule is simple. Model the purchase federally, for the state and, where it applies, for the city before you sign the purchase order. The federal benefit is real. The state benefit depends on which side of the river you practice on and which election you make, and it is smaller than most vendors' financing reps will tell you. Owners in a DSO or group structure also need to decide which entity buys the equipment, because that determines whose return gets the deduction.

If you own your building, or are deciding whether to buy it, a cost segregation study on a buildout or renovation can identify components with shorter recovery periods, some of which qualify for federal bonus depreciation. For a 2026 project, the property has to be placed in service by year-end to start depreciating in 2026. The study itself does not have to be finished by December 31. Property placed in service in earlier years can also be studied, but that usually requires an accounting method change and a separate analysis. Start now, while the invoices and construction schedules are easy to find. The same state caveats apply.

3. Retirement Plans: Some Deadlines Are December 31, and Some Are Not

For most dental practice owners, the retirement plan is the largest deductible move available, and it is the one with the most confusing deadlines.

The 2026 limits. Employee deferrals to a 401(k) are $24,500. The catch-up for owners 50 and older is $8,000, and $11,250 for ages 60 through 63. The total that can go into a defined contribution plan from all sources is $72,000 before catch-ups. The annual benefit limit on a defined benefit plan is $290,000. That is a benefit limit, not a contribution limit. What a cash balance plan actually lets you put in depends on the design and the actuary's numbers, and for a dentist in his fifties who is behind on savings it is often the single largest deduction available.

The Roth catch-up rule is now in effect. If your 2025 FICA wages from the practice exceeded $150,000, your 2026 catch-up contributions have to go in as Roth. The test is based on FICA wages, so an S corporation owner checks the 2025 W-2. A sole proprietor or partner with self-employment income but no W-2 wages is not subject to the Roth requirement and can still make the catch-up pre-tax. If the rule applies to you, you keep the savings, but you lose the deduction on that piece. Confirm the setup with your payroll company and the plan administrator this month, because an incorrect pre-tax catch-up has to be corrected.

What has to happen before year-end. Employee deferrals cannot be created after the wages have already been paid. If you want to defer salary from your remaining 2026 paychecks, the election and the payroll setup have to be in place before those wages reach you. That is the real fourth-quarter deadline.

What does not. A qualified plan does not have to be adopted by December 31 to receive employer contributions for the year. Under the SECURE Act, an employer can adopt a plan by the due date of its return, including extensions, and treat it as adopted on the last day of the prior year. That does not let you create ordinary employee deferrals retroactively. A narrow exception exists for certain first-year plans of sole proprietors with no employees.

Cash balance and defined benefit plans have the same post-year-end adoption and funding flexibility. But the design, the employee coverage, the actuarial calculations and the notices still take time, and the actuary needs the full year's census and compensation data. December 31 is not a universal adoption deadline. Calling the actuary in March is still a poor plan. If you are considering a cash balance plan for 2026, start now.

Employer contributions can come later. Profit-sharing and SEP contributions can be funded after December 31, up to the applicable return deadline. Defined benefit plans have their own funding rules. That gives you flexibility, but it does not give you a plan. Decide the amount now, because the cash has to be there when it is due, and confirm the exact dates with the plan administrator or actuary.

The second cost almost nobody prices. Contributions for your team are part of the deduction, and the plan's testing depends on an accurate count of who your employees are. If a hygienist or associate you treat as a 1099 contractor is later determined to be an employee, the plan can fail testing for every year it was wrong, on top of the payroll tax exposure. I covered why in 1099 versus W-2 for dental associates. Get the classification right before you fund the plan.

4. True Up Your Own Compensation Before the Last Payroll

If your practice is an S corporation, the split between your salary and your distributions is the single biggest payroll tax lever you control. I explained the mechanics in how dentists should pay themselves. October is when you check whether this year's split still makes sense.

Reasonable compensation is a December problem if you ignore it. Your salary has to reflect what you would pay someone else to do your clinical and management work. If the practice had a strong year and you have been taking the same salary since 2022, the number may be too low to defend. If you have been running a high salary out of habit, you may be paying Medicare tax on dollars that could have been distributions. Either way, the fix has to run through payroll in 2026, and the last payroll of the year is the last chance. Associate pay is a useful reality check here, and I covered the market in what associate dentists should be paid.

The qualified business income deduction is permanent, and dentistry is still a specified service business. For 2026, the phase-out on a joint return runs from $403,500 to $553,500 of taxable income. For most other filers it runs from $201,750 to $276,750. Above the top of the range, a dentist gets nothing on practice income. Inside the range, the answer depends on taxable income, QBI and the other pieces of the calculation. Do not assume a dentist at a given income simply gets 20 percent. Run it. If your projection puts you inside the range, a retirement contribution or an equipment purchase can have a second benefit by restoring part of the deduction, and that second benefit can be worth more than the move itself. New Jersey, as noted above, has no equivalent deduction.

Shareholder health insurance. If you are a more-than-2-percent S corporation shareholder, the practice's payment of your health insurance premiums has to be reported on your W-2 for you to deduct it personally. That is a payroll setup item. Confirm it is in place before the W-2s are generated, not after.

Accountable plan reimbursements. Mileage, business use of a cell phone, a home office and similar items can be reimbursed under a properly documented accountable plan. The expense needs a business connection, it has to be substantiated within a reasonable period, and any excess advance has to come back within a reasonable period. There is no rule that every reimbursement must be paid by December 31, but a cash-basis practice that wants a 2026 deduction has to actually pay it in 2026. Clean these up now.

Self-rental. If you own the building separately and rent it to the practice, confirm there is a real lease, a reasonable rent, actual payments and consistent books. A self-rental that exists only as a December journal entry does not survive an audit.

Entity. If you are still a sole proprietor or a single-member LLC and your profit has grown past the point where an S election makes sense, the regular deadline for a 2026 election passed on March 15. That does not end the conversation. The IRS allows a late S election for 2026 to be filed with the 2026 return, as long as the entity has acted like an S corporation all year, there is reasonable cause for missing the date, and the owners report consistently. The practical catch is payroll. An S corporation owner has to be paid a reasonable salary through payroll, so a late election works far better for a practice that has been running the owner on W-2 wages since January than for one that has taken draws all year and would be trying to recreate 2026 payroll in December. One more limit. A late federal S election does not reopen New York's PTET for 2026. That election closed on March 16, 2026, and a December payment cannot create it, so a New York owner who elects S status late gets the federal benefit this year and the PTET benefit starting in 2027. New Jersey is different, because the BAIT election for 2026 can still be made any time up to March 15, 2027, as long as it is filed online before the first payment. If that describes you, run the numbers both ways now, because the compensation study and the state elections in the next section follow from the entity choice. The full analysis is in S corporation versus LLC.

5. New Jersey and New York: Get the Pass-Through Entity Tax Right

For a profitable practice owner in New Jersey or New York, the pass-through entity tax is usually worth more than any other item on this list, and the two states run it on different calendars with different rules. I see more money lost here than anywhere else.

Why it still matters after the SALT cap went up. The individual SALT cap is $40,400 for 2026 on a joint return. It phases down by 30 cents for every dollar of modified adjusted gross income above $505,000, with a $10,000 floor, and it hits that floor at roughly $606,333. Married filing separately has its own limits. Most profitable dental practices in our two states are above that line, so the higher cap does little for them. The cap also returns to $10,000 in 2030.

That is why BAIT and PTET still matter. The practice pays the state tax at the entity level, the entity takes a federal business deduction, and you get a credit on your state return under that state's rules. It is not automatic for every owner. Run the projection.

New Jersey BAIT. Two things trip up owners every year. First, the election is annual, and it has to be filed online through the Division of Taxation before the state will accept any payment, including an estimate. The deadline to elect for 2026 is the original due date of the PTE-100, March 15, 2027, but if you have not elected and want to pay in December, the election comes first. Second, New Jersey's fourth installment is due January 15, 2027, not December 15. That is the state's deadline. The federal deduction is a separate question. A cash-basis practice deducts the entity-level tax on the federal return in the year it is paid, so a January payment is a 2027 federal deduction and a December payment is a 2026 one. An owner's personal NJ-1040-ES payment is not an entity BAIT payment. Check which account the September payment came out of, and check that the amount reflects this year's income, not last year's.

New Jersey's business loss rule changed, and it hits dentists who own their building. This one takes a minute to explain, because New Jersey does not work like the federal return.

On the federal return, a loss from one business offsets income from another. New Jersey does not allow that. The gross income tax puts income into separate categories, such as S corporation income, partnership income, sole proprietor income and rental income, and a loss in one category cannot reduce income in another. For a dentist, the classic case is the practice earning $600,000 as an S corporation while the LLC that owns the building shows a $100,000 rental loss after depreciation and interest. Federally, you are taxed on $500,000. In New Jersey, the starting point is $600,000, and the rental loss is simply ignored.

In 2012 the state softened that with the alternative business calculation adjustment. It let you net the business categories against each other, take the difference between the two numbers, and deduct 50 percent of it. In the example, the difference is $100,000 and the deduction was $50,000, so New Jersey taxed $550,000 instead of $600,000. Losses you could not use carried forward for up to 20 years.

The budget signed June 30, 2026 cut that deduction, retroactive to January 1, 2026, and it cut it by income. If your New Jersey gross income is $500,000 or less, you still get 50 percent. Between $500,000 and $1 million, you get 25 percent. Over $1 million, you get nothing. In the example, the dentist's deduction drops from $50,000 to $25,000, and in his 8.97 percent bracket that is about $2,250 more in New Jersey tax on the same facts as last year, more for an owner already in the 10.75 percent bracket. A dentist over $1 million loses the deduction entirely, and the loss carryforwards built up over the years are worth much less than they were in May.

If you own your office through a separate entity, have a side business or a rental that runs at a loss, or have been carrying forward New Jersey business losses, do not assume 2026 looks like 2025. Rerun the New Jersey estimate before the January payment.

New York PTET. The annual election is due March 15 of the tax year, or the next business day when that falls on a weekend. For 2026 that was Monday, March 16. If you elected, the fourth estimate is due December 15, 2026, and you can still make additional payments before December 31. A cash-basis entity that wants the federal deduction in 2026 pays in 2026. If you missed the March election, a December payment cannot create a 2026 election, which is why I review PTET with New York clients in January, not December. New York City has its own PTET for city residents. It requires the state election first and runs on the same deadline.

For 2027, the deadline is still March 15, 2027. A September 15 date has been proposed in Albany more than once, and practitioners have asked for it since the program began, but as of this writing it has not been enacted. Put March 15 on the calendar and do not plan around a change that has not happened.

Owners who practice in both states should not assume the two regimes work the same way. They do not, and the credit mechanics differ for nonresident owners. Run both before December 15.

Payment timing is the whole game. A $60,000 entity-level payment that lands on January 3 instead of December 29 moves the federal deduction into the following year. That is a timing difference, not a permanently lost deduction, but at the top bracket it is a real cost for a full year. Confirm the payment date, not just the amount.

6. Payroll Items That Have to Be Right Before the Last Check of the Year

Payroll is where good tax planning gets undone by a missed setting. Five items need attention before the final 2026 payroll runs.

Staff bonuses run through payroll. If you are paying a December bonus, it is wages. It is subject to withholding and payroll taxes, and a $30,000 bonus pool costs the practice closer to $32,300 after the employer's share. Cash outside the system is not a bonus strategy. It is an unreported payroll problem, and loose cash is exactly what the controls that catch embezzlement are built to stop. I covered the right way to build a bonus in dental staff compensation. Decide the amount now so it is in the cash flow projection and not a surprise on December 20.

Qualified overtime has to be reported separately. Starting with the 2026 Form W-2, qualified overtime compensation is reported in Box 12 with code TT. Only the qualifying premium counts, not every overtime dollar, and the definition follows the federal Fair Labor Standards Act. Your nonexempt hourly assistants and front desk staff are the ones affected. The IRS gave employers a pass for 2025 and is not giving one for 2026, and an employee cannot take the deduction unless you report it. Ask your payroll company whether the earnings code is set up. Do not wait until January.

The Roth catch-up setting. Covered in section 3, but it is a payroll item, so it belongs here too. Confirm it before the last deferral of the year.

The 1099 threshold moved. For payments made in 2026, the Form 1099-NEC reporting threshold rose to $2,000. That reduces paperwork for small vendors. It changes nothing about classification. A hygienist does not become a contractor because you issue a 1099, and if you fill gaps with temps, remember that a short engagement does not make someone a contractor either. Classification depends on the facts, and filing the 1099s every year is part of what you need if you are relying on Section 530 relief. All of that is in 1099 versus W-2.

Benefits worth a look before open enrollment. Three changes took effect for 2026 that a dental practice can use. The dependent care FSA limit rose from $5,000 to $7,500, the first increase in almost forty years, subject to the plan and nondiscrimination rules. Certain individual-market bronze and catastrophic plans are now HSA-compatible, which does not make every bronze group plan HSA-compatible, so review the actual coverage before you change anything. And beginning in 2026 an employer can contribute up to $2,500 a year to a Trump account for an employee's eligible dependent under a written program, excluded from the employee's income. None of these is a large deduction. All three are things the practice down the street may offer when it tries to hire your assistant, which is the market I described in how to find a dental hygienist when no one is applying. Coordinate any new benefit with the provider before you announce it.

And one more. If you run the bonus, the catch-up correction and the shareholder health insurance through a special payroll in the last week of December, make sure it processes in 2026. A payroll with a January 2 pay date is 2027 wages, no matter when you submitted it.

7. The Deductions That Changed This Year

Several provisions of the 2025 federal law took effect for the first time in 2026. Most owners have not felt them yet because they show up on a return nobody has filed. A few matter for a dental practice.

Meals: the rules changed, and most practices have them in one account. Starting January 1, 2026, the deduction for meals you provide to your own staff at the office is gone. That was scheduled under the 2017 tax law and the 2025 law did not reverse it. Think of it in three buckets.

• Food for your team at the office: zero. The breakroom coffee and snacks, the lunch you bring in on a long surgical day, the pizza for the staff meeting. These were 50 percent deductible through 2025. For 2026 and after they are not deductible at all.

  
  

• Meals with people outside the practice: 50 percent. Lunch with a referring oral surgeon, dinner with a lab owner or a consultant, a meal while you are traveling overnight for a CE course. These are still 50 percent deductible, as long as you can document who was there and why.

  
  

• Employee social events: 100 percent. The holiday party, the summer outing, the team dinner to celebrate a milestone. Events that are primarily for the benefit of your staff remain fully deductible, the same as before.

  
  

The problem is not the rule. The problem is that most practices code all three buckets to a single meals account, and in March nobody can tell the pizza from the party. Split the account now, tell your office manager which is which, and you will not be reconstructing a year of receipts in tax season.

Charitable deductions have a new floor and a new ceiling. For 2026, an itemizer deducts charitable gifts only above 0.5 percent of adjusted gross income. On $800,000 of AGI, the first $4,000 of gifts does nothing. There is also a new limitation on all itemized deductions for taxpayers in the top bracket. It is not a simple 35 percent cap. The calculation reduces itemized deductions by 2/37, about 5.4 percent, of the lesser of total itemized deductions or taxable income above the 37 percent threshold. The result is close to a 35 percent benefit, but model it rather than assume it. If you give the same amount every year, bunching two years of gifts into one, often through a donor-advised fund, clears the floor and recovers more of the deduction. The gift should start with the charity. The deduction comes second.

The SALT cap. Covered in section 5. The higher cap starts phasing down at $505,000 of MAGI and hits its $10,000 floor at about $606,333. That is the whole reason the pass-through entity tax still matters for owners at your income level.

What did not change at the federal level. Bonus depreciation stays at 100 percent. The qualified business income deduction is permanent. The federal estate and gift exemption is $15 million per person for 2026, indexed after that, and the annual gift exclusion is $19,000. That takes the federal pressure off most dental families.

What the states did instead. New Jersey has had no estate tax for deaths after 2017, but it still has an inheritance tax based on who inherits. Transfers to Class A beneficiaries, which include a spouse, parents, grandparents, children, stepchildren and descendants, are exempt. Leave the practice building to a sibling or a nephew and the tax applies. New York's 2026 estate exclusion is $7,350,000, it is not portable between spouses, and it has a cliff: once the taxable estate exceeds 105 percent of the exclusion, which is $7,717,500 for 2026, the entire estate is taxed, not just the excess, at rates up to 16 percent. A New York dentist with a practice, a building, a house and a retirement account is closer to that number than he thinks. Know what your practice is really worth before deciding the estate rules do not apply to you.

8. If a Transaction Is on the Table, the Calendar Is Part of the Price

A practice sale, a purchase or an associate buy-in that closes in December can have a very different tax result from one that closes in January. Tax should not drive the deal. But you should know the tax cost before you sign it, and the difference can be larger than anything else in this article.

Sellers. Most dental practice sales are asset sales. The price is allocated among equipment, receivables where they transfer, goodwill, the restrictive covenant and other intangibles, and each category is taxed differently. Equipment produces ordinary income recapture on the depreciation you already took. If you took 100 percent bonus on the scanner two years ago, do not expect capital gain treatment on its sale price. Goodwill is generally capital gain. A December closing puts that gain in the same year as a full year of practice income. A January closing moves it to the next year, though installment terms and other provisions affect when gain is recognized. Run both dates before the letter of intent locks you in. A DSO deal adds rollover equity, earnouts, escrows and contingent payments, and I walked through why the headline multiple is the least informative number in the package. The after-tax proceeds are what matter, which is also the lens for deciding whether to sell to a DSO at all.

Buyers. In an asset acquisition, the equipment and other eligible property can qualify for federal depreciation, including bonus where the requirements are met, in the year you place it in service, which for a December closing is 2026. Purchased goodwill and most other Section 197 intangibles are amortized over 15 years regardless. The allocation is negotiated, but it is constrained by fair market value and the Section 1060 residual method, and both sides report it on Form 8594. The seller wants the opposite answer from you. Get your CPA into the allocation discussion before the asset purchase agreement is drafted, not after. The rest of the diligence is in due diligence on your practice purchase and the issues buyers and sellers must consider in an appraisal, and remember that the seller's PPO rates are not your rates. If you are using a broker, here is what that costs and buys you.

If a New Jersey building is part of the deal. Since July 10, 2025, the supplemental realty transfer fee, which everyone still calls the mansion tax, is paid by the seller on covered property, including Class 4A commercial property, and it is graduated. The rate applies to the entire consideration:

• More than $1 million through $2 million: 1 percent

• More than $2 million through $2.5 million: 2 percent

• More than $2.5 million through $3 million: 2.5 percent

• More than $3 million through $3.5 million: 3 percent

• More than $3.5 million: 3.5 percent

  
  

A covered commercial property sold for exactly $3 million carries a $75,000 fee. A dollar over $3 million and the rate on the whole price becomes 3 percent. That is on top of the ordinary realty transfer fee, and the same schedule applies to the sale of a controlling interest in an entity that owns the property. Price it into the deal before anyone agrees on a number, and revisit whether to own or lease with that fee in the model.

Associates buying in: where the interest goes depends on what you bought. Every associate assumes the interest on a buy-in loan is a business expense that offsets practice income. Sometimes it is. The tax law does not look at what the loan is called. It follows the money, under what the regulations call the tracing rules, and the answer depends on the structure.

• You buy assets. If you buy the practice's assets, or your share of them, and the loan is used for that purchase, the interest traces to a trade or business you work in. It is deductible against practice income with no special limit, the same as the loan on a CBCT.

  
  

• You buy S corporation stock or a partnership interest. The loan bought an ownership interest, not equipment, so the interest is allocated across what the entity owns and does. If the entity is an active practice and you materially participate, which an associate buying in almost always does, the interest is treated as business interest and is deductible on your return against your share of the practice income. If part of the entity's assets are investments or a passive activity, that part of the interest is limited.

  
  

• The practice borrows instead of you. If the entity takes the loan and redeems the senior doctor's shares, the interest is an entity expense that reduces everyone's share of income, including the seller's until he is out. That can be the cleanest result, but it changes who bears the cost.

  
  

Two more points. First, the federal business interest limitation under Section 163(j) does not apply to a practice under the small business gross receipts threshold, which is nearly every dental practice, so the limit you may have read about for larger companies is not your problem. Second, New Jersey is less forgiving than the federal return. The state's gross income tax does not allow a deduction for interest you pay personally on a loan to buy S corporation stock or a partnership interest. Interest the entity pays reduces the entity's income. Interest you pay personally on the same purchase generally gets no New Jersey deduction at all. That alone can move the decision between a stock purchase and an asset purchase, or between the associate borrowing and the practice borrowing.

Model the structure before you sign the documents, not after. If you are weighing a buy-in against starting your own practice, the after-tax cash flow is the comparison, not the price, and funding a startup has its own timing questions.

Owners within five years of an exit. This is the year to clean up what a buyer will normalize. Personal expenses in the practice. Family members on payroll who are not really working. Owner compensation that makes no sense. A 1099 associate who should be a W-2. Poor records. Some of those support legitimate add-backs. Others reveal recurring costs or liabilities, and every one of them reduces the earnings a buyer pays a multiple on. Fixing them in October is cheaper than explaining them in diligence. That was the point of get your internal house in order, and if the buyer you planned on is your associate, read when your succession plan no longer fits your associate before you count on that exit.

The Year-End Calendar

Here are the dates, in order. Put them on the office calendar, not just yours.

The Best Tax Return Is the One You Planned in October

None of this is exotic. A projection, a few purchase decisions made for business reasons, a retirement plan funded on time, a compensation split you can defend, a state payment that clears in the right year and a payroll that is set up correctly. The owners who do these things do not have a dramatic April. They have a quiet one. They are the same owners who get the basics right in every other part of the practice.

The owners who wait have a different experience. They buy equipment they did not need. They discover in January that something had to happen in December. They fund the wrong retirement plan, or none, and they find out about the Roth catch-up rule when the correction notice arrives. None of that is about the tax law. It is about the calendar.

This matters today, and it matters at the exit. Clean books, defensible compensation, a payer mix that makes sense and a payroll that is classified correctly are the first things a buyer or a lender looks at, which is why I keep saying that what your practice is worth has very little to do with the old 70 percent of collections rule.

As I wrote in June, the best tax strategy is not preparing a better return. It is creating a better year. There is still time left in this one.

At MRL Advisory Group, we run year-end projections and planning for dental practice owners across New Jersey and New York through our tax services: equipment timing, retirement plan design, owner compensation, New Jersey BAIT, New York PTET and the transaction modeling that goes with a sale or a buy-in. That is what a dental CPA does before the return is prepared, not after. We keep the books current through accounting and bookkeeping so the projection is built on real numbers, and we support buyers and sellers through transition advisory. If you have not seen a 2026 projection yet, schedule a free consultation and let's look at the numbers together while there is still time to change them.

Please note: The rules, limits, thresholds and deadlines described in this article are very likely to change. Several provisions of the 2025 federal tax law are being interpreted through new IRS guidance, New Jersey and New York adjust their pass-through entity tax rules regularly, and retirement plan limits are indexed every year. This article reflects the general landscape as of the review date at the top and is not updated automatically.

This article is provided for general educational purposes only. It is not legal advice, tax advice or accounting advice, and reading it does not create a client relationship of any kind. Nothing in it should be relied on in deciding whether to purchase equipment, adopt or fund a retirement plan, set owner compensation, make a state tax election, or structure a transaction.

Every situation is unique. Federal, New Jersey and New York rules apply differently depending on your entity, your income, your other activities and your state of residence, and two practices that look similar can reach very different results. Readers must obtain their own advice. Anyone considering any of the moves described here should consult their own CPA, and where applicable their attorney and plan administrator, about their particular circumstances before taking any action.