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tax considerations when selling a dental practice

Each party in the buying process has different priorities. The goodwill of the purchased practice requires a different path to write off. A dental practice contains several different kinds of assets—equipment, supplies, real property, goodwill—and each asset requires separate accounting and tax rules. The Q&A can be found in the Journal of The Michigan Dental Association (April 2020). For corporate taxes, there is no difference in rates between ordinary income and capital gains. An example of how allocation of practice income can save taxes, Consider the following adjustments to practice income. Sure, it will take some time and careful planning, but it’s not as complicated as you might think to maximize the value of your practice. After this documentation, he’ll need to deduct the cost of each asset accordingly. When considering selling their practices, most dentists consider the tax consequences. The following are a few tax considerations when selling a dental practice: Schedule the Sale. Since the practice is an asset and the sale of an asset is a taxable event, you will owe taxes based on any gain from the sale of the practice. This includes items like furniture, fixtures, equipment, dental supplies, patient files, and goodwill of the current practice. It may seem obvious, but many sellers don’t realize they need to divide the sale price heavily towards assets that will produce long-term capital and less toward assets that lead to ordinary income. Because the IRS has established different depreciation and time factors for each practice asset. Each item acquired within the practice comes with a different cost and depreciation value. It may seem obvious, but many sellers don’t realize they need to divide the sale price heavily towards assets that will produce long-term capital and less toward assets that lead to ordinary income. Health Care attorney, Daniel Schulte, answers questions related to the sale of a dental practice. When you sell a tangible asset, you will be paying taxes during that tax year on your personal income. Here are four key considerations that you as a dental practice owner should be thinking about as you begin to mull a sale of your business: 1. The recent U.S. Supreme Court decision, Wayfair v. South Dakota, put the spotlight on who can charge sales tax for online transactions.The Tax Cuts and Jobs Act of 2017 made significant changes to the U.S. tax code. It will take fifteen years for the goodwill to be repaid. You can also visit us at goUSDT.com for more information. Whilst trading in any business can be complicated, there are specific considerations which need to be addressed when dealing with specialised organisations, such as dental … This represents a summary and cannot address all issues under each particular strategy or all the strategies that may be considered. US Dental Transitions requires a signed listing agreement and a completed practice valuation packet, 3-years of tax returns, and production by provider codes. How Long Does It Take to Sell a Dental Practice. Typically, the group of assets that would be sold between the selling party and buying party would include dental supplies, furniture, […] When selling your practice, the extra tax burden a C corporation may face can result in a material reduction in net proceeds. Start early. Selling your dental practice is an exciting, but challenging process that requires expert knowledge. Before buying or selling a dental practice, great care and planning should be taken to consider the TAX CONSEQUENCES regarding the allocation of the sale price to the various assets involved in the transaction. Items that fall under ordinary income will face a tax rate somewhere between 10-35%. For example: furniture, light fixtures, and dental equipment depreciate over time. These items are valued based on the original purchase price minus the claimed depreciation. Determining how to structure the deal is often dependent on several factors. This field is for validation purposes and should be left unchanged. Whether you’re selling a dental practice or investing in a surgery, it’s important to get the right professional advice. When buying or selling a dental practice, a portion of the profit or cost will be taxed. However, the seller is at an advantage by having the power to allocate his assets how he sees fit. As seen in DentistryIQ.com, August 21, 2017, Real property improvements (book value) $267,308, sold @ $250,000 = ($17,308) (, Equipment (book value) $20,801, sold @ $75,000 = $54,919 (, Assuming 20% capital gains rate and 35% ordinary income tax rate =, Real property improvements sold @ $150,000 = ($117,308) (. Considerations of buying or selling a dental practice please feel free to call me on 01844 260111 the. 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