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Stop Chasing Shiny Tax Deductions: What Dentists Get Wrong · The Millionaire Dentist™

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  Hello, everyone, Welcome to the Millionaire Dentist Podcast, brought to you by
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  four Quadnans Advisory. On this podcast, we break down the world of dentistry,
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  finances and business practices to help you become the millionaire dentists you deserve to
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  be. Please be advised we do speak with an honest tongue and may not
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  be safe for work. Hello and welcome. This is Casey Hires back at
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  the Millionaire Dentnist Podcast in studio with co host Jared Bridgeman. Casey, I
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  know it was you had a great day yesterday. You were a celebrating President's
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  Day, Is that right? Yeah? I took it off for other reasons,
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  but you know, yeah, it was George Washington and Abraham like as
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  combined birthday thing. Well, what do we have? We've got how many?
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  How many presidents have? We had? Forty six? Probably about five
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  of them were any good? I won't name it which ones. This is
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  the time I got to get political. I'm very excited a little bit.
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  Yes, yeah, yeah, I see Kevin Rotten is here, Kevin A
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  NBA c P A n B A in m We just had the All Star
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  weekend here in Central Indiana. M b A CPA. Kevin Rotin, Hello,
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  just walking in here like Connor McGregor with a swag, just hanging out
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  with us today. Oh yeah, looking forward to it. I was gonna
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  skip this one and ye, and now I'm here. I guess we're talking
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  tax? Is that? The yes? Is that the yeah? We're gonna
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  be talking about uh, people who like to chase tax deductions. Yeah,
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  don't go chasing tax that's right. Can you see me a little couple of
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  bars? No, no, no, no, Kevin. One of the
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  ones we've talked about on a previous podcast that can be seen as a good
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  way to help reduce your your your taxes is paying children through your practice,
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  preferably your own children. Yeah. Yeah, paying your children through the practice,
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  and and not just practices, but across all businesses. Is that's sometimes
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  a h oh one of those shiny tax deductions that people think, Oh,
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  I can shelter some of them my money. Yeah. Can I just hoard
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  like eighty grand a year under my kid's pillow? No, no, you
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  cannot. Okay, now I'm getting my sea legs. So President's Day,
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  government taking our money taxes and the dumb stuff practice owners obsess over tax wise
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  because they don't have any other clues. Is that what you're gonna get into
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  today. Absolutely, the kids, the cars I run this through the practice
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  are run out to the practice. Look at me tripping over nickels to get
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  the dollars. Yeah. Yeah, there's actually quite a few of those shiny
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  tax deductions that are not really what they seem to be on the surface.
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  And these would be sometimes ones that are atypical of a standard CPA advising their
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  clients to do. Yeah. So when I come to you and I'm like,
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  Kevin, can I just you know, I've got two kids ones six
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  years old, I'm gonna hire him for seven grand a year to clean my
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  office for me. Yeah, that's great. Right, it's a good idea.
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  You might get away with that for a little while, but it'll catch
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  up to you paying your children. I don't want to say no, no,
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  you can't do that. That's that's not the case. But it's not
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  the slam dunk that all practice owners think it is. For twenty twenty four,
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  you could pay your children a child fourteen thousand, six hundred dollars and
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  they wouldn't have to pay federal income on that in a year. Yeah,
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  and you only fourteen thousand, six hundred. So on the surface, you're
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  thinking, okay, if you're in the twenty five maybe federal twenty five percent
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  tax bracket, maybe we'll say, for instance, five percent for state.
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  You're looking at okay, if I could shift, you know, almost fifteen
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  thousand dollars in income to my children, that's a thirty percent tax savings.
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  However, you don't think about if you're an esque or you're paying payroll taxes
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  on that. So you're looking at already fifteen point three percent in so security,
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  Medicare, plus you have unemployment taxes federal state, you know, food
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  and SUDA. Uh so you know at the end your SUDA state unemployment tax.
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  Look at you looking at me with your I was thinking it was the
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  Genesis song Sudada. I love how you looked at me and explained his acronym.
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  You may proceed, Kevin, all right, but yeah, you know,
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  adding all that in, you're actually saving less than fifteen percent, or
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  about two thousand dollars. So now that's a Now that's a great point because
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  people think that that that is such a sophisticated thing to do. Two grand
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  we're not scoffing a two grand, But I mean, I don't know,
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  take your friends to a nice dinner and you know, have a couple of
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  bottles of wine and you're gonna get there. So that is not the slam
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  dunk like you had mentioned. Right. No, And if you're if your
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  practice is collecting, you know, million over a million dollars, two grand
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  is very minuscold me out compared amount comparatively. Yeah, and that's not counting
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  the expenses, the extra filing fees. So now you're you're paying well plus
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  the cleaning company you actually have to hire to clean your place that your kid
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  doesn't clean very good, right, right, So yeah, it's it's not
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  the slame dunk on tax savings. There is a little bit there if it's
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  done right, but there's so many hoops to jump through, and there's cases
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  where we do this. You do this. It's for the it's it's the
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  right thing for the right situation. Yeah, there is strategy there, just
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  not excessive. It's less. It sounds less impactful than most people make it
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  sound. Because I hear that a lot, Oh you know, I want
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  to do this or that I feel like my accountant is too conservative. Typically
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  they're just lazy. That's what we end up seeing. And for those accounting
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  firms who listen to this podcast, my apologies. I'm sure you're great.
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  But for dental specific sure you've got a good personality. Yeah, but for
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  dental specific practice owners, it doesn't cut the mustard. No. And there's
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  actually, you know, another side of it that practice owners aren't maybe cognizant
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  of, is you know, you've got to follow child labor laws. There's
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  federal law. There's actually a lot of states that have a lot stricter age
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  restrictions on top of the federal law. Yeah, see, you might want
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  to look at your particular state as well. Yeah, yeah, there's some
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  states that even for your kids, it's like, no, you can't.
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  I've never thought of that. That's well, real quick, I didn't want
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  to touch upon You said that the cap was at like a little over fourteen
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  thousand a year, Yes, fourteen six hundred. So if you pay your
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  kid twenty k, what happens then then that kicks them into having to owe
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  income tax and so that even makes the uh savings less all right, yeah,
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  child label laws. You also it really needs to be kind of look
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  like a arms length transaction. You know, the pay has to be reasonable,
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  can't be excessive, and that that job needs to be suitable for their
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  age. You know, I R S SOL Security. They know when they
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  issued that solid security number, they know how old that kid is. So
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  sorry, but paying your toddler uh ad front desk admin wages isn't really going
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  to fly. Uh So it has to be reasonable, it has to be
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  suitable, and it has to be set up properly, keep records and yeah,
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  you got to keep in mind if you're audited. That's one place the
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  IRS is quick to investigate is family members payroll. Okay, so we've got
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  we've got the kids covered. One that we've talked about several times, but
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  it's always good to touch upon again for anybody that's new that's listening, buying
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  new equipment to pay less taxes, great idea. It can be if if
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  it's necessary. Probably a lot of people listening toward the end of the year,
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  they probably got a call from their equipment sales rep talking about incentives and
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  probably even mentioned a Section one seventy nine business tax deduction sexy. So it's
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  for that unnecessary equipment. It can be just throwing money away really, so
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  you might be trying to spend ten thousand dollars on not be some machinery to
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  try and save two grand. Spending money or going into debt is a terrible
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  tax strategy, right, And what are you going to use it for?
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  Hopefully not a expensive coat hanger. And I'll use that joke from time to
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  time out out and about I don't know thirty forty percent laugh and go,
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  ah, I use these two things I bought, but this one thing I
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  bought one year, I don't use it at all. And they basically concede
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  and agree, Yeah, that can happen, right, Yeah, you're and
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  then all kinds of money on depreciating assets instead of maybe appreciating investments. The
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  opportunity costs, and also on that tax deduction. It's only available if you
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  have good basis. If you don't have an I think we've had a podcast
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  about that recently. Yeah, go back in the library and listen to that
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  one yep covering all the bases on tax basis. That's an even that episode
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  everybody. But yeah, if you don't have good basis, then you can't
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  take the section one seventy nine. So there goes that shiny tax deduction.
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  No, you already you spent money on something you may or may not need,
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  hoping to get a tax deduction. Then you can't even get the no
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  kid, Yeah, but instead of wasting like that ten thousand dollars on an
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  unneeded piece of equipment just so you don't have to pay three thousands, so
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  you're in that thirty percent tax bracket. So you're spending ten so you don't
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  have to pay Uncle Sam three. And yeah, take the seven thousand dollars
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  invest it, ah, so that you have ten fourteen thousand, and long
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  after that piece of equipment would have been hauled off, you now have more
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  money you pocket there. Yeah, and again I'm not talking about equipment that's
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  not coming that's needed, or maybe you've decided to add a new procedure and
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  you've actually gone through the courses of whatever it takes to get that. That's
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  a very reasonable that's a good reason to get that equipment. That's the reason,
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  just going to bring him money, not chasing that tax deduction. Okay,
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  Kevin, I was thinking about this the other day. My wife has
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  her own LC and I was told not by anybody here, but then this
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  was years ago. Of course, that my wife and I can just go
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  out to dinner whenever you want and chalk it on up. Make that a
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  business meeting. We talked about her quick books for about twelve minutes. That's
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  a thing, Yeah, that people think is that they can do so.
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  Deducting business meals, deducting business meetings is definitely one of those deductions that's misused,
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  overused. The idea behind that deduction is kind of for S corpse.
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  A lot of practice owners are organized as S corps. They can have up
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  to one hundred domestic shareholders. So when the IRS is talking about, you
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  know, those annual business meetings. Now that's not to say that for husband
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  and wives or you know, one or two shareholder owned as corps can't utilize
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  that. But it's not to use on your Caribbean vacation. And yeah,
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  I'm not saying it's all or nothing. A lot of times you can utilize
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  those, whether you're going out of town for continuing education, a seminar,
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  a lecturer like you said, a convention. I mean a lot of times
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  practice owners will group that with a vacation. Now you do have to separate
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  personal and business expenses, but that travel can be is tax deductible. You
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  had a fourth option that we wanted to talk about today. What about And
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  I've seen people who have done this before too. Business vehicles another area that
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  can be taken overly taken advantage of. Can be useful, but also can
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  be problematic. Absolutely, so the irs they actually have. It's a fifty
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  percent business use rule, pretty flat out, and that's the business owner has
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  to use that vehicle for more than fifty percent business use to be incorporated into
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  the practice, to be purchased by the practice, for the expenses to run
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  through the practice. And that's excluding commute. So great, so I can't
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  It doesn't count drive into and from work, that's correct, But I would
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  count if I had to go from the practice to maybe I'm speaking somewhere over.
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  Ok Yeah, supply runs CPE lectures, meetings with colleagues, meetings with
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  patients, any of those. What if you signed up for this really cool
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  like a Bourbon and financial advice event you do get to meet Casey Hires.
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  Would that be useful for business vehicle if you d have ninety minutes one way
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  to go to a CE event? Yes? Okay, so Casey, I
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  want to let me ask you you're the one with the boots on the ground
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  out there are these Do these kind of cover the things you hear owners talk
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  about and mention when they're trying to save on taxis. Yeah, here's the
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  before and after. Most of these things get mentioned in some regard. And
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  then by the end, if we end up getting all their information, looking
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  at a consultation, all of the areas that we will work to improve on,
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  structure differently, do the right way for practice owners. I mean,
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  there's tens and tens and tens of thousands of dollars that our impact can be
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  with these folks, right, but they're stuck with my kid is on the
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  website. So I'm going to pay them to be a model and do the
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  fourteen six yeah, and get you know what, we just find out a
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  couple thousand dollars, you know for all that hooplah and then the car.
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  Yeah, I mean, that's that's what we hear. But it comes from
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  a place, doesn't come from a place where people are uneducated. I'm sorry,
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  are dumb. They're just uneducated right right that they're not aware and they
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  know that they're paying too much to Uncle Sam yep, and so they're frustrated,
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  so they're trying to figure out what can I do? But again,
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  this is all about some of the little things we're in reality and you might
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  get into this, Kevin a little bit, but you know entity structure and
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  how you're setting up, you know, different income. There's so many things
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  that if you do it the right way, you're actually your tax liabilities reduced
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  fifty sixty thousand dollars a year. That's what we do. So with that
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  business use of the vehicle, So if it is in the practice, the
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  IRS expects to see a percent of personal use on that W two or you
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  know, the wages for the practice owner, because nobody's using their vehicle for
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  business. So a lot of times we recommend just something that's easier and just
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  as beneficial as using the standard mileage rate. Just make it a personal vehicle,
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  pay for it personally in the sixty four zero point five what is it
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  now, sixty seven cents a mile four four inflation, So that makes sense.
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  Yeah, all you have to do is keep track of the mileage.
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  There's plenty of apps on on the app stores out there. There's a lot
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  of pens and paper too that you can keep in the box yep. Yeah,
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  find somebody as good at doing your taxes as you are as doing implants
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  or root canals or whatever dental procedure you're doing. Right, there's your tag
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  there's your tagline, Jared Kevin. Anything else you want to follow up with
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  or in the on I don't okay, all right, I really appreciate you
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  being on today. Casey, you are about to head out this week,
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  aren't you. Aren't you going somewhere? Well, yeah, the team's going
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  to be at an orthodonic meeting in Georgia, Ritz Carlton. We've got people
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  at the Midwinter, we got somebody else at a dental society. We're going
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  to be all over the place, and if you are interested in talking to
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  us, just come on up. Check us out on Facebook and Instagram and
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  LinkedIn, Twitter or x whatever we call it. Now go to Four Quadrantadvisory
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  dot com slash events to see where we will be next. Thank you all
• 16:22
  for coming and have a good day. That's all the time we have today.
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  Thank you to our guests for their insight and for sharing some really great
• 16:33
  information, and thank you to you the listener for tuning in. The Millionaire
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  their clients. Thank you again for joining us, and we'll see you next time.