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Maximize Your 2027 Profitability - Section 179 & Bonus Depreciation Tax Benefits · The Dental Edge

0:01
SPEAKER_00: Welcome to the Dental Edge, where clinical precision meets a cutting-edge approach to dentistry.
0:06
SPEAKER_00: In each episode, we bring you conversations with the best and brightest minds in the profession, diving deep into the latest clinical innovations and the intersection of technology in your practice.
0:17
SPEAKER_00: Learn from some of the brightest minds in the field as they share invaluable insights to help you elevate your clinical skills and stay ahead in the ever-evolving world of dentistry.
0:28
SPEAKER_00: If you're a tech-savvy dentist ready to sharpen your edge, you're in the right place.
0:34
SPEAKER_02: Hello everyone.
0:35
SPEAKER_02: Welcome back to the Dental Edge Podcast, brought to you by the outstanding partners of dental learning.
0:40
SPEAKER_02: We're here to help unpack the raw data and metrics behind the ever-evolving world of dentistry and give you valuable insights to help you in your professional career.
0:49
SPEAKER_01: Yes, thanks for tuning in to all you out there in the dental space who care enough to listen each episode as we build a better community within dentistry together.
0:56
SPEAKER_01: Never forget that you are a part of that amazing community, and you too can help yourself grow with the fascinating resources provided by continuing education groups like dental learning.
1:05
SPEAKER_02: They really are the best in dental education.
1:08
SPEAKER_02: And well, today we're opening the discussion to what many would find a no-brainer: finding more revenue for your practice.
1:16
SPEAKER_02: Today's topic is actually pretty interesting when you get right to the core, and it can make a great difference in your practice's annual profitability.
1:23
SPEAKER_02: What if I told you that the government actively wants to hand you$30,000 or possibly more to upgrade your practice?
1:30
SPEAKER_01: Sounds almost too good to be true.
1:32
SPEAKER_01: Most practice owners want to say yes, and many would probably think it's a scam, right?
1:36
SPEAKER_02: Exactly.
1:37
SPEAKER_02: It sounds completely crazy at surface level.
1:39
SPEAKER_02: But when you look closely at how the most profitable dental practices actually operate, the biggest barriers to growth aren't clinical at all.
1:47
SPEAKER_01: No, not usually, and we see this time and time again around the globe.
1:51
SPEAKER_02: One of the biggest limitations to practice growth is financial-based, and often stem from psychological tendencies or misunderstandings.
1:58
SPEAKER_02: And get this the wildest part is that the person most likely to stop you from taking advantage of that government money is actually your own accountant.
2:06
SPEAKER_01: Oh, absolutely.
2:07
SPEAKER_01: That happens all the time, and it's a shame to see how that detachment can cost practices money that's just sitting on the table.
2:14
SPEAKER_02: So strap in and turn up your volume for this special deep dive as we learn how your practice can find more profit come tax season.
2:21
SPEAKER_02: Today, we have a very specific mission.
2:23
SPEAKER_02: We are extrapolating the mechanics of how you can maximize your 2027 profitability by leveraging some really smart tax strategies, specifically Section 179 and other bonus depreciation tax benefits.
2:36
SPEAKER_01: Exactly.
2:37
SPEAKER_01: And we will be combining those tools with a true CEO mindset so that you can effectively run your practice and make life easier with better tax implications.
2:45
SPEAKER_01: Today's discussion is a critical intersection between running a successful dental practice and balancing the finances so you can focus more on operational endeavors.
2:57
SPEAKER_01: You know, as dental professionals, we tend to focus so heavily on the clinical output, right?
3:02
SPEAKER_01: The procedures, the patient care, the healthcare system at large.
3:05
SPEAKER_02: Sure, which makes sense.
3:07
SPEAKER_02: That's our comfort zone, our day-to-day operational autopilot.
3:10
SPEAKER_01: Of course, and it's easy to stay stuck in the comfort zone.
3:13
SPEAKER_01: It's also easier to miss things that could put your practice and teams ahead.
3:17
SPEAKER_01: However, the structural input of the business just gets totally ignored when you isolate your frame of mind on this.
3:23
SPEAKER_01: You can have the best hands in the entire industry, but if your financial mechanics and your internal business mindset are working against you, you will eventually hit a ceiling.
3:32
SPEAKER_02: Right?
3:32
SPEAKER_02: You cap your own potential by failing to recognize the importance of financial literacy and how it impacts your practice and teams.
3:39
SPEAKER_01: Yes, the decisions made in the fourth quarter of the year and the mindset driving those decisions, they literally dictate a practice's reality for the next decade.
3:48
SPEAKER_02: The impacts are just huge.
3:50
SPEAKER_02: Today, though, we are fortunate to have a guide through that intersection today, as we're pulling from a really informative and practical presentation by Doug Fettig.
3:59
SPEAKER_01: Yeah, Doug's material is just phenomenal and really poignant to the success of a modern dental practice.
4:05
SPEAKER_02: It really is.
4:06
SPEAKER_02: So Doug is a CPA and an MBA, but what makes his insight so compelling is his wonderfully unconventional background.
4:13
SPEAKER_02: I mean, at age 20, he actually dropped out of college to hitchhike across Europe.
4:18
SPEAKER_01: Which is pretty brave, honestly.
4:20
SPEAKER_01: I've always wanted to do that, but I usually chicken out.
4:22
SPEAKER_02: Right?
4:23
SPEAKER_02: During which he spent seven years working these incredibly wild jobs, like selling encyclopedias door-to-door, managing restaurants.
4:30
SPEAKER_02: He even worked as a blackjack dealer before entering the world of academia.
4:34
SPEAKER_01: It gives Doug such a different lens and should help us all listening today to connect the philosophies and strategies to our own practices.
4:43
SPEAKER_02: Exactly.
4:44
SPEAKER_02: That unique journey gave him this completely fresh street-level perspective on business and leadership.
4:50
SPEAKER_02: So now he spends his time teaching dentists how to think like true CEOs rather than strictly as clinicians.
4:56
SPEAKER_01: Which is a massive shift for a lot of people.
4:58
SPEAKER_01: It's easy to forget you're running a business when you have your hands in someone's mouth.
5:02
SPEAKER_02: Definitely.
5:03
SPEAKER_02: But today we'll be connecting those dots so that you can run your practice with more assurance and find profit where it's easily overlooked.
5:10
SPEAKER_02: So let's unpack this.
5:12
SPEAKER_02: If scarcity and abundance are the two ends of the spectrum, I have to imagine practice owners naturally sort themselves out based on their risk tolerance.
5:21
SPEAKER_02: How does Doug categorize that psychology?
5:24
SPEAKER_01: Well, uh, Doug breaks the dental industry down into three distinct buckets.
5:29
SPEAKER_01: Honestly, you can usually spot which bucket an owner is in within like five minutes of walking into their clinic.
5:35
SPEAKER_02: Wow, really?
5:36
SPEAKER_02: Just five minutes?
5:37
SPEAKER_02: It's that apparent?
5:38
SPEAKER_01: Oh yeah.
5:39
SPEAKER_01: The physical space tells the whole story.
5:41
SPEAKER_01: The first group is what he calls the protectors.
5:43
SPEAKER_02: The protectors, all right.
5:44
SPEAKER_02: Interesting.
5:45
SPEAKER_02: Who are they?
5:46
SPEAKER_01: These are owners entirely dominated by a scarcity mindset.
5:50
SPEAKER_01: They believe the economic pie is static, so they try to build a moat around their practice to save every single penny.
5:56
SPEAKER_01: These practices often find themselves tripping over their own feet at the end of the fiscal year.
6:01
SPEAKER_02: Like holding a handful of sand, right?
6:03
SPEAKER_02: You squeeze too tight and it just slips through your fingers.
6:07
SPEAKER_01: That is a perfect analogy.
6:08
SPEAKER_01: To them, every dollar spent on the practice is viewed as a dollar permanently lost.
6:13
SPEAKER_01: And Doug actually highlights a deeply tragic real-world example of this.
6:18
SPEAKER_02: Oh, right.
6:18
SPEAKER_02: The guy who wanted to retire but had an abrupt reality check balancing the books.
6:23
SPEAKER_01: Yes, Doug mentions a 58-year-old dentist who was ready to sell his practice and retire because his knees were just giving out.
6:30
SPEAKER_01: And well, for 10 whole years, this owner had been in total hibernation mode.
6:35
SPEAKER_01: His business was in the background, using the same SOPs he had for decades while he'd service patients.
6:41
SPEAKER_02: Just coasting.
6:42
SPEAKER_01: Worse than coasting.
6:43
SPEAKER_01: He hadn't bought new equipment over his tenure.
6:46
SPEAKER_01: The waiting room carpet was visibly frayed and discolored.
6:50
SPEAKER_01: The exterior of the building was super run down.
6:53
SPEAKER_01: And he did all of this because he believed he was, quote unquote, saving money to maximize his nest egg before selling.
6:59
SPEAKER_02: So he thought he was protecting his margin, but he was actually depreciating his entire life's work.
7:05
SPEAKER_02: Most people, when buying a practice, want something turnkey, not a money pit where they have to take on full restorations.
7:11
SPEAKER_01: That is the tragic irony of it.
7:14
SPEAKER_01: The market just does not reward hibernation.
7:17
SPEAKER_01: We see this time and time again across the dental industry.
7:20
SPEAKER_01: This clinic was doing a million dollars a year in production.
7:23
SPEAKER_02: Which sounds pretty great on paper, but when you look deeper at the business and the practice's goals for retirement, things become a bit more clear to understand.
7:32
SPEAKER_01: It does.
7:32
SPEAKER_01: When young, ambitious buyers came to look at it, they saw an archaic facility that would require massive capital to modernize.
7:40
SPEAKER_01: Almost nobody is going to pay a premium for that.
7:42
SPEAKER_01: Why would they?
7:43
SPEAKER_01: So the highest offer he received was 60% of his annual production.
7:48
SPEAKER_02: That is just$600,000 from the initial asking of$1 million.
7:52
SPEAKER_02: Not something any practice owner would aspire for.
7:55
SPEAKER_02: No one wants to work their whole professional life to find out their success was limited by their own short-sightedness.
8:01
SPEAKER_01: Sadly, it gets worse.
8:02
SPEAKER_01: Once you factor in the taxes on that sale, he walked away with roughly$350,000 for a lifetime of work.
8:09
SPEAKER_02: Wow, that's devastating, both financially and emotionally.
8:12
SPEAKER_02: Imagine how undervalued that doctor must have felt.
8:15
SPEAKER_01: The meeting literally ended in tears.
8:18
SPEAKER_01: He essentially cost-cut his way into a compromised retirement, and his lack of forward thinking cost him more prosperous golden years.
8:25
SPEAKER_02: This maps perfectly to how legacy businesses fail.
8:28
SPEAKER_02: In many cases, that dentist was operating exactly like Sears.
8:32
SPEAKER_02: He thought he was saving his margin by cutting back on modernization.
8:35
SPEAKER_01: Yep, the classic Sears model mistake.
8:37
SPEAKER_01: Sears was great for decades, but where are they now?
8:40
SPEAKER_02: Right?
8:40
SPEAKER_02: And we should also consider that a competitor down the street is probably operating like Walmart, investing billions in IT and infrastructure just to stay relevant.
8:49
SPEAKER_02: You cannot cost cut your way to prosperity.
8:52
SPEAKER_02: Investing in yourself and your practice will pay dividends.
8:55
SPEAKER_01: You really can't.
8:56
SPEAKER_01: A true CEO never grows a business by just cutting costs, but by understanding the business and revenue that keeps things moving.
9:03
SPEAKER_02: So if that's the business protector mindset, what happens when an owner actually wants to invest but just can't seem to pull the trigger?
9:10
SPEAKER_02: What does Doug suggest for these types of practice owners?
9:13
SPEAKER_01: Yes, that brings us to the second bucket, which he calls the perfectionist.
9:19
SPEAKER_01: We probably all know or have worked for someone like this.
9:22
SPEAKER_02: Ah, yes, the perfectionists.
9:24
SPEAKER_02: I used to consider myself a perfectionist for a bit of my life, but after taking a moment to unpack and digest these ideologies and practical approaches at running a successful business, I found better ways to operate.
9:35
SPEAKER_01: Oh, for sure.
9:36
SPEAKER_01: These are the practice owners who are entirely paralyzed by the idea that something better is just around the corner.
9:42
SPEAKER_01: They are aware enough to know the possibilities out there, but get caught in the moment of action.
9:47
SPEAKER_02: Right?
9:47
SPEAKER_02: Like waiting for the next big thing, but not taking the leap to get there.
9:51
SPEAKER_01: Exactly.
9:52
SPEAKER_01: They will sit on their hands, waiting for technology to be absolutely perfect, or get cheaper and more standardized before they will commit to buying it and rolling it out into their systems.
10:04
SPEAKER_01: They obsess over the specs of the newest scanner.
10:07
SPEAKER_01: They read every single forum and ultimately.
10:09
SPEAKER_02: Let me guess, they decide to wait another year.
10:12
SPEAKER_01: Always.
10:12
SPEAKER_01: They wait another year to see what the next generation looks like and see if their margins become more profitable for the practice.
10:19
SPEAKER_02: It's honestly like refusing to upgrade from a flip phone because you're waiting for smartphone technology to be absolutely perfected before you buy one.
10:27
SPEAKER_01: That is exactly what it's like.
10:29
SPEAKER_01: And you'd be surprised how many practice owners still function with that flip phone mentality and operational perspective.
10:36
SPEAKER_02: In the clinical world, that means you're forcing your patients to deal with archaic, uncomfortable impressions for years while you wait for some affordable, perfect digital scanner that doesn't even exist yet.
10:47
SPEAKER_01: Doug points out that perfection is the enemy of both profitability and patient care.
10:52
SPEAKER_01: By waiting, you don't just miss out on the financial gains of a more efficient workflow.
10:57
SPEAKER_01: You actively degrade the standard of care you are providing today and going forward in the future.
11:02
SPEAKER_02: Yeah, that makes a lot of sense.
11:04
SPEAKER_02: The better you do today, and each day moving forward, compound for the sake of your patience and practice in the future.
11:10
SPEAKER_01: A true practice leader with a CEO mindset understands that progress requires action.
11:16
SPEAKER_01: This leads us to the third bucket, the prosperous group of practice owners.
11:20
SPEAKER_02: What makes a dentist or practice owner fall into this prosperous group?
11:23
SPEAKER_02: What should someone listening be aware of or look out for?
11:26
SPEAKER_01: These are the abundant-minded leaders.
11:28
SPEAKER_01: They collaborate, they take calculated risks, and they fundamentally understand that prosperity comes from growing the revenue side of the equation.
11:36
SPEAKER_01: More money coming in the doors ultimately means more is kept for the practice, right?
11:41
SPEAKER_02: Yes, and this type of leader often keeps shrinking the margins until there's just no wiggle room left.
11:47
SPEAKER_02: Everything is on an operational deadline, with little tolerance or give.
11:51
SPEAKER_01: Precisely.
11:52
SPEAKER_01: You simply cannot shrink your way to wealth.
11:54
SPEAKER_01: There has to be a more structured approach.
11:56
SPEAKER_02: There is the hidden trap I see all the time.
11:58
SPEAKER_02: Rewire your own brain for a minute, right?
12:00
SPEAKER_02: You walk into the clinic on a Monday totally ready.
12:03
SPEAKER_02: CBCT scanner is ready for use.
12:05
SPEAKER_02: And then you get immediately shut down by the very person you pay to advise you, your CPA.
12:11
SPEAKER_02: Why is the accountant stopping me from using this equipment I know will make life easier, you ask?
12:16
SPEAKER_01: Yes, this is perhaps the most dangerous friction point in dental business ownership.
12:20
SPEAKER_01: Doug is incredibly firm on this issue.
12:22
SPEAKER_02: What does Mr.
12:23
SPEAKER_02: Fedig say about it?
12:24
SPEAKER_01: He says, never let your CPA intimidate you or baffle you with their brilliance.
12:30
SPEAKER_01: You have to remember how CPAs are fundamentally trained.
12:33
SPEAKER_01: They look backwards, not in the now or in the future.
12:37
SPEAKER_01: They are educated in historical compliance.
12:40
SPEAKER_01: They look in the past to ensure the numbers add up and the taxes are filed correctly.
12:45
SPEAKER_01: They are rarely trained in forward-looking business strategy.
12:48
SPEAKER_02: That is such a crucial distinction for people to understand.
12:52
SPEAKER_02: As practice leaders, we often have to consider the whole scope of the business, especially in Q4 as we wrap up the fiscal year.
12:59
SPEAKER_01: It really is.
12:59
SPEAKER_01: So if you bring a brilliant investment idea to your CPA, like getting a new CBCT, and their very first response is, it's not in the budget.
13:08
SPEAKER_01: In these events, a discussion could be warranted.
13:10
SPEAKER_01: You should seriously consider finding a new advisor if they are unable to look beyond the past and see the larger picture operating at your practice.
13:19
SPEAKER_02: Because the budget is inherently a scarcity document, right?
13:23
SPEAKER_02: It's just a prediction based on last year's behavior.
13:26
SPEAKER_02: This can be helpful at times, but also can prove to be a limiter growth and success.
13:31
SPEAKER_01: Precisely.
13:32
SPEAKER_01: Budgets are merely estimates.
13:34
SPEAKER_01: They are a historical guess at what your revenue and expenses might look like.
13:39
SPEAKER_01: They do not dictate investment decisions or how the upcoming year will go for the business.
13:43
SPEAKER_01: It's a projection, not a reality.
13:45
SPEAKER_02: So if the budget is the wrong metric, what should a prosperous practice owner be asking their CPA to calculate?
13:51
SPEAKER_01: ROI.
13:53
SPEAKER_01: Return on investment is the only metric that matters when purchasing equipment.
13:57
SPEAKER_01: Ask yourselves and the accountant, how will this create returns for my business?
14:02
SPEAKER_01: The answers may open your eyes and show you more than what's seen at surface level.
14:06
SPEAKER_02: Doug mentions we shouldn't get bogged down in basic division here because the math on ROI is simple, right?
14:12
SPEAKER_02: It's profit minus cost divided by the investment.
14:16
SPEAKER_01: Exactly.
14:16
SPEAKER_01: The math is simple, but often there can be tertiary factors the CPA can easily overlook.
14:21
SPEAKER_02: The mechanism behind that math in a dental practice is completely fascinating to me.
14:25
SPEAKER_01: Indeed it is, because the mechanism is entirely psychological, both for the provider and the patient.
14:31
SPEAKER_02: How so?
14:32
SPEAKER_01: Well, let's look at a$100,000 fully loaded CBCT scanner.
14:36
SPEAKER_01: A lot of dentists break out in hives at the mere thought of meeting a salesperson in the operatory.
14:41
SPEAKER_02: Oh yeah, they hate it.
14:42
SPEAKER_02: They just want to focus on the dentistry, not the sales interaction and spending someone's yearly salary on a new machine.
14:49
SPEAKER_01: Right.
14:49
SPEAKER_01: They hate trying to convince a patient to accept a complex treatment plan.
14:53
SPEAKER_01: But if we connect this to the bigger picture, when you invest in high-level visual technology, the tech actually does the selling for you.
15:00
SPEAKER_01: It can help patients come to better understandings and lead to more conversion rates when it comes to procedures.
15:06
SPEAKER_02: Exactly, because a patient can see it for themselves and decide in the moment.
15:10
SPEAKER_02: Not just take the dentist's words as faith, they are able to form a connection and case acceptance goes through the roof.
15:17
SPEAKER_01: When a patient can look at a crystal clear 3D rendering on a screen and actually see the cracked root of their own tooth, the conversation completely shifts.
15:26
SPEAKER_01: It goes from what's happening to what can we do to get this fixed?
15:32
SPEAKER_01: It can also aid in financial reluctance within patients.
15:36
SPEAKER_02: You aren't selling them a crown anymore, you are selling them a healthcare solution in real time.
15:41
SPEAKER_01: Right on.
15:42
SPEAKER_01: You are simply guiding them through their own anatomy.
15:45
SPEAKER_01: It removes the pressure.
15:46
SPEAKER_01: And if that$100,000 machine increases your case acceptance rate so significantly that it generates$200,000 in new top-line profit.
15:56
SPEAKER_02: Your ROI is 100%?
15:58
SPEAKER_01: Yes, the machine pays for itself by removing the friction of case acceptance, which is a factor that many CPAs will not take into account.
16:05
SPEAKER_02: And here's where it gets really interesting for me.
16:08
SPEAKER_02: Let's review the government subsidy aspect of this, because we know we want to invest, we understand the ROI mechanism, but how do we use the tax code to essentially get the government to fund this growth?
16:18
SPEAKER_02: Ah, the tax magic.
16:20
SPEAKER_01: Yes.
16:20
SPEAKER_01: Here is where many practice leaders and owners will find a pleasant surprise.
16:24
SPEAKER_01: Many of these types of investments can help increase profitability when utilizing a structured approach for tax deductions.
16:31
SPEAKER_02: Absolutely.
16:31
SPEAKER_02: Doug isolates section 179 of government tax code and breaks down how it can actually change the underlying mechanics of buying equipment for a dental practice.
16:41
SPEAKER_01: Yes, very valuable information for anyone looking to increase profitability.
16:47
SPEAKER_01: So to understand the power of Section 179, you first have to look at the traditional tax codes and depreciation benefits.
16:55
SPEAKER_01: It's incredibly frustrating maneuvering and understanding mechanics of taxes and standard depreciation.
17:01
SPEAKER_02: It's usually a very slow and tedious process, right?
17:04
SPEAKER_01: Slow and painful.
17:05
SPEAKER_01: Normally, if you buy a$100,000 piece of equipment, the IRS forces you to chop up the cost of that machine and deduct tiny fractions of it over five, seven, or even ten years.
17:17
SPEAKER_01: So you just get a slower sheltering over time as more equipment fills the practice.
17:21
SPEAKER_02: You just get a slow drip of tax relief, tailing off as time progresses.
17:25
SPEAKER_01: Right.
17:26
SPEAKER_01: The machine itself might even become obsolete in that time.
17:29
SPEAKER_01: Section 179 effectively breaks that rule.
17:32
SPEAKER_01: It allows businesses to take that entire decade's worth of tax deductions and smash them into year one.
17:37
SPEAKER_02: Oh, wow.
17:38
SPEAKER_02: Immediate ROI for end of the year returns.
17:41
SPEAKER_02: Almost sounds too good to be true.
17:42
SPEAKER_02: Does Doug really have some helpful insights to make this a reality?
17:46
SPEAKER_01: Yes, he does.
17:47
SPEAKER_01: As of 2024, you can expense up to between$1.2 and$2 million immediately.
17:54
SPEAKER_01: And the phase out doesn't even begin until you hit over$3 million in purchases.
17:59
SPEAKER_02: So instead of a slow drip, you get the whole bucket of tax savings the second the machine hits the floor?
18:04
SPEAKER_01: The second it hits?
18:05
SPEAKER_01: Yes.
18:06
SPEAKER_01: Knowing this information completely alters the true cost of the equipment.
18:10
SPEAKER_01: Let's return to that$100,000 CBCT scanner we mentioned earlier.
18:14
SPEAKER_02: Okay, let's do the math on that.
18:16
SPEAKER_02: So we can see this section$179 incentive at work.
18:20
SPEAKER_01: If you are in an effective 30% tax bracket, you are not actually paying$100,000 for that machine.
18:26
SPEAKER_02: Because of the tax deduction.
18:28
SPEAKER_01: Right, because that machinery expense immediately lowers your taxable income.
18:32
SPEAKER_01: The government is effectively handing you$30,000 back in tax savings.
18:37
SPEAKER_01: The true net cost to your practice is only$70,000.
18:41
SPEAKER_02: That is massive savings on the back end.
18:43
SPEAKER_02: But there's a catch with the timeline, isn't there?
18:45
SPEAKER_01: Yes, there is a massive ticking clock on this strategy.
18:48
SPEAKER_01: The golden rule of year-end tax planning is that the equipment cannot be purchased only.
18:52
SPEAKER_01: It must be delivered and put into service by December 31st to claim that deduction for the current tax year.
18:59
SPEAKER_02: Which means you can't wait until December 20th to make a decision.
19:02
SPEAKER_02: You have to put it in motion with consideration of that 31st deadline.
19:06
SPEAKER_01: Exactly.
19:07
SPEAKER_01: You have to plan ahead, especially if there are shipping or installation delays.
19:10
SPEAKER_02: But assuming your timing is right, the cash flow implications here seem wild if you use financing.
19:15
SPEAKER_01: The leverage you can achieve with financing these taxable devices is unbelievable.
19:20
SPEAKER_01: Let's say you finance that$100,000 scanner through a major distributor like Patterson.
19:25
SPEAKER_02: Okay, go on.
19:26
SPEAKER_01: Often they will offer terms where you don't even have to make your first payment for 90 days.
19:32
SPEAKER_01: So the machine is installed in November.
19:34
SPEAKER_01: It immediately starts generating new revenue through higher case acceptance and admittance of procedures.
19:41
SPEAKER_01: You file your taxes a few months later and get that$30,000 tax benefit back in your pocket.
19:47
SPEAKER_01: When it's time to make your first couple of payments, the tax benefits really start to compound.
19:52
SPEAKER_02: Before you've barely made a single monthly payment, you're bringing in revenue and have that$30,000 coming down the pipeline, really starting to make that expensive new device more practical.
20:02
SPEAKER_01: Exactly.
20:03
SPEAKER_01: You have effectively received a massive influx of cash.
20:06
SPEAKER_01: Your immediate ROI goes through the roof because you are using the government's tax code and the distributors' money to fund your immediate growth.
20:13
SPEAKER_02: That is a massive light bulb moment.
20:15
SPEAKER_02: But I have to play devil's advocate here because there is a pervasive fear among high earners that ruins this whole strategy.
20:22
SPEAKER_01: Let me guess.
20:23
SPEAKER_01: The fear of making too much money?
20:24
SPEAKER_02: Well, yes.
20:26
SPEAKER_02: If this new tech increases my production by hundreds of thousands of dollars, won't I just get bumped into a higher tax bracket and actually end up taking home less money during tax season?
20:36
SPEAKER_01: It is the most common and honestly most destructive misconception in personal finance.
20:40
SPEAKER_01: It reveals a fundamental misunderstanding of how a marginal tax system works.
20:45
SPEAKER_02: So how does Doug, our author of today's discussion, debunk this?
20:48
SPEAKER_01: Well, he addresses this head on with a concept called the tax stair step.
20:52
SPEAKER_02: The tax stair step.
20:54
SPEAKER_02: Break that down for us all because I think it's crucial to understand so we can overcome this fear and tax mumbo jumbo.
21:00
SPEAKER_01: Let's begin by thinking of tax brackets literally as a staircase.
21:04
SPEAKER_01: When your income pushes you up to a higher tax bracket, it is not as if your entire income is suddenly taxed at that new higher punitive rate.
21:12
SPEAKER_01: It doesn't retroactively apply to everything you've earned.
21:16
SPEAKER_01: Only the new money, the specific dollars earned above that new step, gets taxed at the higher percentage.
21:22
SPEAKER_01: The steps below, when you look back down the staircase, are all taxed at lower rates and aren't affected by the steps above.
21:30
SPEAKER_02: So if I cross the line, only the money over the line gets hit with a higher tax percentage?
21:35
SPEAKER_01: Yes.
21:35
SPEAKER_01: For example, if the top bracket kicks in at around$730,000, only the money you earn, starting at$730,001, is taxed at that top rate of 37%.
21:49
SPEAKER_02: I see.
21:49
SPEAKER_02: And what's beneath that is sheltered at a lower percentage than 37%.
21:54
SPEAKER_01: Yes.
21:54
SPEAKER_01: Every single dollar below that threshold is still taxed at the lower corresponding steps on the staircase.
22:00
SPEAKER_01: You are always paying a blended average rate.
22:02
SPEAKER_01: You shouldn't have to fear about earning more by year's end.
22:06
SPEAKER_02: So earning more money is always mathematically a good thing.
22:09
SPEAKER_02: That's reassuring.
22:10
SPEAKER_01: Always.
22:11
SPEAKER_01: You will never, under any circumstances, take home less net income simply because you increased your production and moved up a bracket.
22:19
SPEAKER_01: It's a common misconception, but when you start analyzing the books year after year, the numbers start to show.
22:25
SPEAKER_02: That completely neutralizes the fear of too much success.
22:29
SPEAKER_02: So good to clarify that.
22:31
SPEAKER_02: We have the tech strategy optimized, and we have the visual tech driving the clinical production.
22:36
SPEAKER_02: But you can have the best tech in the world, and none of it matters if your practice culture is miserable or if you don't have a viable exit strategy.
22:44
SPEAKER_02: A true CEO has to manage the people and the future, not just balance the expense sheets.
22:49
SPEAKER_01: Oh, without a doubt, and this touches on how you value your own time, which is really the ultimate non-renewable resource.
22:55
SPEAKER_02: So true.
22:56
SPEAKER_02: Time is finite, and we can only work in this profession for so long.
23:00
SPEAKER_01: There's a brilliant quote in the material that says there's always time to make more money, never time to make more time.
23:05
SPEAKER_01: To build a sustainable, joyful practice, a CEO needs to ruthlessly outsource and save time where able.
23:11
SPEAKER_02: But the natural instinct of a business owner is to control everything.
23:14
SPEAKER_02: What exactly should a prosperous owner be outsourcing?
23:18
SPEAKER_01: Absolutely everything, with two critical exceptions.
23:20
SPEAKER_02: Really?
23:21
SPEAKER_02: Interesting.
23:21
SPEAKER_02: What are they?
23:22
SPEAKER_01: The clinical dentistry, assuming you are the primary provider, and leadership.
23:26
SPEAKER_02: You can't outsource leadership.
23:28
SPEAKER_02: It makes sense when you are driving what your practice and business should look like and how things operate.
23:32
SPEAKER_01: No, you can't outsource either of those essential components to running a business.
23:37
SPEAKER_01: You can hire a brilliant office manager, but you cannot outsource the cultural leadership of the practice.
23:42
SPEAKER_01: Roles matter, and your time matters.
23:44
SPEAKER_01: You are the thermostat for the entire building, and you work to apply clinical outcomes for the patients you see.
23:50
SPEAKER_02: So for those other items, who are we outsourcing to?
23:53
SPEAKER_01: To better protect your time, you should be leaning heavily on your external experts.
23:57
SPEAKER_01: Treat your dental rep not just as a salesperson, but as a key business advisor.
24:02
SPEAKER_02: Why?
24:03
SPEAKER_02: Because they see a ton of practices?
24:04
SPEAKER_01: Exactly.
24:05
SPEAKER_01: A good rep sees over a hundred different practices a month.
24:09
SPEAKER_01: They know exactly which workflows are succeeding and which ones are failing miserably.
24:13
SPEAKER_01: The reps are in the trenches and see it themselves from an outside looking in perspective.
24:17
SPEAKER_02: They have all the market intel.
24:19
SPEAKER_02: You just need to access it when interacting with them.
24:22
SPEAKER_02: Most of the time, they are happy to share information if they feel it can help them make a sale.
24:26
SPEAKER_01: They do.
24:27
SPEAKER_01: And internally, part of that leadership is having the courage to protect your culture.
24:32
SPEAKER_01: If you have a toxic employee on your team and you do nothing because you are afraid of conflict, your team loses confidence in your ability to lead.
24:39
SPEAKER_02: You lose the respect of everybody else at the cost of protecting one person that's tough to deal with.
24:45
SPEAKER_01: You lose the respect of your high performers too, but you have to have the courage to fire those bad apples who destroy the environment.
24:52
SPEAKER_01: It creates a culture of comfort and mutual respect.
24:55
SPEAKER_01: Your team will walk over hot coals for you if you have their back.
24:59
SPEAKER_02: Culture eats strategy for breakfast, right?
25:01
SPEAKER_01: Absolutely.
25:02
SPEAKER_01: Setting the tone of the office for the people who keep things going is one of the biggest differences a leader can make at their practice.
25:10
SPEAKER_02: If the team is aligned, the new tech integrations are seamless.
25:13
SPEAKER_02: This brings us to the ultimate finish line for most owners: retirement.
25:16
SPEAKER_02: Doug shares a staggering statistic that completely stopped me in my tracks.
25:20
SPEAKER_02: Dentists retire on average seven years later than the general national average.
25:25
SPEAKER_01: It's tragic when you consider the amount of skill it takes to be a dentist, let alone the schooling and accreditations.
25:31
SPEAKER_01: Running a dental practice is not like running other conventional businesses like retail or your local hardware shop.
25:37
SPEAKER_02: It seems completely backwards for such a lucrative profession, that delay in retirement.
25:42
SPEAKER_02: Why do dentists on average retire later than most other professions?
25:46
SPEAKER_01: It really boils down to terrible financial advice followed early in their career and just poor long-term planning.
25:52
SPEAKER_02: Really?
25:53
SPEAKER_02: Just bad advice and misguided planning ahead?
25:55
SPEAKER_01: Mostly, yeah.
25:56
SPEAKER_01: You know, the general public looks at a dentist and their gross production and assumes they are, you know, swimming in cash.
26:03
SPEAKER_01: They don't see the crushing overhead, the payroll, the tax burden, the massive debt load.
26:10
SPEAKER_01: Sadly, many young dentists are fed a deeply flawed financial philosophy right out of school.
26:16
SPEAKER_02: The prolonged and eventual death of many dental businesses.
26:19
SPEAKER_02: Are you talking about the debt-free obsession?
26:21
SPEAKER_01: Yes.
26:22
SPEAKER_01: The worst possible financial advice given to young providers is that they must aggressively pay off all their debt, especially their student loans.
26:30
SPEAKER_01: Many can fall into this trap before they even think about investing for retirement.
26:34
SPEAKER_02: I hear that all the time.
26:35
SPEAKER_02: It's expensive to run a business, and every dollar counts.
26:39
SPEAKER_02: It's hard for people to set aside that extra bit for retirement's sake.
26:42
SPEAKER_01: It's so common, but treating student loans and operational overhead like a toxic expense is a massive scarcity mindset.
26:50
SPEAKER_01: Those loans were a strategic investment in your future earning power.
26:54
SPEAKER_01: Give them time for a better ROI.
26:56
SPEAKER_02: Okay, so why is paying them off fast so bad?
26:59
SPEAKER_01: Because if you funnel every spare dollar into debt and wait until you are 50 years old to become debt-free before you start investing, you have permanently lost the most valuable asset in wealth creation.
27:10
SPEAKER_02: Which is asset compounding over time.
27:12
SPEAKER_01: Spot on.
27:13
SPEAKER_01: The math on compounding is brutal if you start late.
27:16
SPEAKER_01: In Doug's philosophy and findings with dental practices, it's never too early to start investing for retirement.
27:21
SPEAKER_02: Give us the math on that so we can see how compounding is better than a faster payment of debt.
27:26
SPEAKER_01: Okay, if you put$100,000 into a solid index fund at age 35 and we assume historical average market returns, that money grows to roughly$1 million by the time you are 65.
27:38
SPEAKER_02: Okay,$100,000 compounded over 30 years is around a million dollars.
27:43
SPEAKER_01: It doubles roughly every seven to ten years.
27:46
SPEAKER_01: But if you wait until you are 50 to invest that exact same$100,000, it only has time to grow to about$300,000 by the age of 65.
27:54
SPEAKER_01: By waiting to be debt-free, you literally cost your future self$700,000 in invisible wealth.
28:00
SPEAKER_01: You must learn to invest concurrently while managing sensible debt.
28:03
SPEAKER_02: That power of time brings up one of the most fascinating wealth transfer nuggets from this deep dive, the Roth IRA strategy for children, or what I like to call the Chipotle trick.
28:13
SPEAKER_01: Oh, this is such a good one.
28:14
SPEAKER_01: Please share.
28:15
SPEAKER_02: First, let's break down the legal guardrails of how a practice owner can actually pull this off.
28:20
SPEAKER_01: This is an unbelievably powerful multi-generational wealth strategy, provided you follow the IRS rules strictly, of course.
28:27
SPEAKER_02: Right.
28:27
SPEAKER_02: Keep it legal and above board.
28:29
SPEAKER_02: The core rule of a Roth IRA is that you can only contribute earned income.
28:34
SPEAKER_02: If your teenager gets a summer job at Chipotle and earns$3,000, they have legitimate earned income.
28:40
SPEAKER_02: You, as the parent, can then gift them$3,000 to fully fund a Roth IRA in their name.
28:46
SPEAKER_02: So they get to keep their Chipotle money and you fund the retirement.
28:49
SPEAKER_01: Exactly.
28:50
SPEAKER_01: But it gets even better for business owners.
28:52
SPEAKER_01: Doug actually paid his two-year-old granddaughter$500 for legitimately modeling in his professional presentation slides.
28:59
SPEAKER_02: Wait, so a two-year-old legally has a retirement account?
29:02
SPEAKER_01: Yes, because the work was documented, legitimate, and paid at a reasonable market rate for a child model.
29:08
SPEAKER_02: That's amazing.
29:10
SPEAKER_02: An interesting way to share wealth and move money around at the business.
29:13
SPEAKER_02: Maybe as a doctor, someone could think about hiring their relatives for modeling.
29:17
SPEAKER_01: It generated a W-2 or a 1099 equivalent.
29:21
SPEAKER_01: That earned income was then placed into a Roth IRA.
29:24
SPEAKER_01: The beauty of the Roth is that the money goes in after tax, grows completely tax-free for decades, and is pulled out tax-free at retirement or prior, as long as it does not exceed the original contribution amount.
29:36
SPEAKER_02: The compounding on that must be insane from two years old.
29:39
SPEAKER_01: It is.
29:40
SPEAKER_01: That$500 invested for his granddaughter at age two will compound to nearly$100,000 by the time she is 65.
29:48
SPEAKER_01: Imagine adding to those investments when able, instead of paying down debt as quickly as you can.
29:54
SPEAKER_02: That is absolutely brilliant, and it perfectly illustrates the difference between scarcity and abundance.
29:59
SPEAKER_02: It all comes back to looking at the bigger picture, finding those leverage points, and understanding the mechanisms behind the math.
30:05
SPEAKER_02: Numbers can reveal different information depending on how you look at them.
30:09
SPEAKER_01: It really does.
30:10
SPEAKER_01: It's all connected.
30:11
SPEAKER_01: Your business can thrive with some simple tweaks, considerations, and taking advantage of timing and tax benefits that we have available to us as business owners.
30:21
SPEAKER_02: I'd like to leave all you listening with a final thought for the day.
30:24
SPEAKER_02: We've talked a lot about the financial cost of waiting for the perfect moment to buy equipment or waiting to be debt-free before investing.
30:32
SPEAKER_02: But what is the emotional cost to you, your family, and your clinical team of practicing in a scarcity mindset every single day?
30:40
SPEAKER_02: What is one strategic decision you can make tomorrow to stop protecting your slice and start baking more pies?
30:46
SPEAKER_01: That's the really important question.
30:47
SPEAKER_01: Time is important, so is money, but our emotions' ability to go on as humans cannot be overlooked either.
30:54
SPEAKER_02: As always, thanks for tuning in for today's episode of the Dental Edge Podcast.
30:58
SPEAKER_02: We'd like to give a super thank you to our incredible author, Doug Fedig, and our amazing CE supporters at Patterson, one of North America's largest full service distributors of dental supplies, equipment, software, and practice services.
31:10
SPEAKER_02: Patterson truly helps dental professionals find the best care for their patients while also maximizing profitability for your practice.
31:17
SPEAKER_02: We encourage you to dig deeper into U.S.
31:19
SPEAKER_02: Tax Section 179 and other bonus tax depreciation benefits.
31:23
SPEAKER_02: To check out Doug's original webinar and learn more about how you can improve 2027 profitability, please visit www.dentallearning.net.
31:33
SPEAKER_02: The Incredible Partners of Dental Learning offer many great conversations and CE resources to help you advance yourself within the profession of dentistry.
31:41
SPEAKER_02: We're excited to have you here listening to the Dental Edge podcast.
31:45
SPEAKER_02: Join us next time for more of the latest and greatest in modern dentistry.