Podcast Summary: Art of Dental Finance and Management

Episode: Year End Tax Planning for Dentists
Host: Art Wiederman, CPA
Date: November 26, 2025
Guests: Don Watson (Tustin, CA office), Scott Haberman (Fort Collins, CO office), both dental-specialist CPA partners at Eide Bailly

Episode Overview

The annual year-end tax planning episode aims to equip dental practice owners with actionable strategies to reduce taxes, optimize financial decisions, and manage practice profitability. Art Wiederman, joined by Eide Bailly partners Don Watson and Scott Haberman, provides detailed guidance on tax-saving opportunities, changes due to new legislation (the "One Big Beautiful Bill" or OB3 Act), and practical steps to take before December 31st.

Key Discussion Points and Insights

1. Annual Tax Planning Process for Dentists

• Proactive, Year-Round Planning: Tax strategies for dentists aren’t a once-a-year event; regular meetings are recommended, especially around salary schedules, withholdings, and retirement funding.
  • Don Watson: "There’s probably about two or three times during the course of the year that we... touch somebody’s numbers that might alert us to doing something with regards to taxes." [16:15]
• Avoid Surprises: Aim to prevent large, unexpected April payments by adjusting through the year.
• Spring and Year-End Reviews: Use mid-year and November/December check-ins to finalize planning and ensure optimal deductions.

Timestamps:

• [16:15] – Don Watson explains comprehensive tax planning
• [19:06] – Scott Haberman discusses benefits of ongoing advisor-client communication

2. Cybersecurity for Dental Practices

• Vulnerabilities and Liability: Cyber threats are real, insurance is rarely sufficient, and penalties and lawsuits can be severe.
  • Scott Haberman: “It’s a new age... it’s risky... not just coming through the front door, it’s coming through the wires. You just gotta be careful with your practice.” [12:11]
• Action Steps: Review penetration testing, update insurance, don’t rely solely on IT providers, and follow documented best practices to protect patient info and comply with HIPAA.

Timestamps:

• [12:11–15:29] – Cybersecurity urgency and practical tips

3. Cash Basis Accounting & Year-End Deductions

• Cash Basis Rules: Dentists pay tax on collections received and on expenses paid (by check or credit card) before December 31st; deferral tricks (like “mailbox stuffing”) typically do not hold up to IRS scrutiny.
  • Don Watson: “You have to spend that dollar by December 31st to have an impact.” [23:28]
• Cannot Defer Recognizing Income: Especially for associates and fee-for-service—1099s and electronic payments make withholding checks ineffective for tax purposes.

Timestamps:

• [20:50] – Art introduces cash basis accounting
• [21:06–23:28] – Don Watson breaks down what can and cannot be done

4. Marginal Tax Rates and Multi-Year Planning

• Progressive Tax System Explained: Tax rates are layered; only income in the top bracket is taxed at highest rates. Effective planning looks across years, especially as legislation changes.
  • Scott Haberman: “A lot of folks don’t completely understand... it’s a marginal tax rate system...” [24:09]
• Recent Law Changes: OB3 makes recent tax brackets/permanent extensions stable, barring future political changes.

Timestamps:

• [24:09–26:17] – Marginal rates and effective tax rate explained

5. High-Impact Tax Planning Areas

a. Equipment Purchases

• Placed-In-Service Requirement: Equipment must be physically installed and operational by year-end to qualify for deduction.
• Bonus Depreciation Restored: OB3 restores 100% bonus depreciation for qualifying equipment.
• S Corp Caution: Owners must have sufficient basis in the S corporation to deduct large purchases; financing can complicate this.
  • Art Wiederman: "Go to your CPA, do you have S Corporation basis... you will not have basis and will not be a happy camper..." [30:35]

Timestamps:

• [27:32–30:35] – Rules for equipment write-offs

b. Automobile Deduction Strategies

• Vehicle Weight Matters: Over 6,000 lbs can potentially get full deduction; under is subject to “luxury auto” caps.
• Business Use Recordkeeping: IRS requires legitimate logs; family and personal use complicate deduction.
  • Scott Haberman: “Keep a log. If you ever got...an IRS audit...‘Well, here it is’ and case closed.” [32:56]
  • Don Watson: “It’d be hard to defend with the IRS if you were showing...three vehicles and you’re an only owner.” [36:09]

Timestamps:

• [31:35–37:32] – Automobile deduction advice

c. Retirement Plans ("Baby Bear, Mama Bear, Papa Bear")

• Plan Types:
  • Simple IRA: $20k–$40k range; cheap, easy, but broad employee eligibility.
  • 401(k) with profit sharing: Up to $100k (including spousal contributions), more control over eligibility/vesting.
  • Defined Benefit/Cash Balance Plan: For high-income and/or late-career dentists, can allow $100k+ per year.
• Strategic Funding: Use practice loan “freed cash flow” to fund retirement when debt is paid off.
  • Scott Haberman: “Don’t sleep on retirement plans...ending up and finishing your career with a $6 million 401k is a pretty big deal.” [66:55]

Timestamps:

• [43:19–46:12] – Retirement plan tiers
• [66:55] – Compound growth example

d. Family Payroll Planning

• Shift Income by Employing Family: Pay children for legitimate work—up to the standard deduction (over $15,000 federally in 2025) can be tax-free to them.
  • Don Watson: “If you’re going to give money anyway, why not shift it from your tax table to theirs?” [47:12]
• Documentation Critical: Duties must be reasonable for age, and compensation paid throughout the year, not lump-sum at year-end.

Timestamps:

• [47:12–49:59] – Employing family for tax savings

e. Owning Practice Real Estate & Cost Segregation

• Equity and Tax Benefits: Build practice equity vs. paying a landlord.
• Cost Segregation Studies: Engineer-led studies can convert approx. 30% of building value into rapid, year-1 tax deductions under 100% bonus depreciation rules. Must be properly grouped in tax filings.
  • Scott Haberman: "The sweet spot, let’s stay under the 32% bracket as much as we can. And if we go over that... maybe it’s time to buy another building." [53:42]
• Retroactive Studies: Properties bought in previous 5–10 years can often “catch up” missed depreciation.

Timestamps:

• [50:39–55:05] – Real estate ownership/cost segregation

6. Key OB3 Act Tax Law Changes

• Standard Deduction: Increased to $15,750 (single), $31,500 (joint).
• SALT Deduction: State/local tax deduction cap raised from $10,000 to $40,000, but phases out for higher incomes.
• Qualified Business Income (QBI)/Section 199A Deduction: 20% deduction for pass-through income made permanent, subject to business-type and income limitations.
• Pass-Through Entity Taxes: Many states allow S corps/partnerships to pay state tax at entity level for federal deduction.
• Energy Incentives: Solar and other credits generally expiring after 2025; immediate action required to qualify.
• Child Tax Credit: Increased to $2,200 per child, but phases out above $400k–$500k AGI.
• Estate Tax Exclusions: [Discussed briefly; not changed significantly.]
  • Don Watson: "Just wouldn’t want you to disregard the benefit that could be had by just spending a couple hours with somebody about your situation." [66:51]

Timestamps:

• [55:51–61:11] – OB3 Act’s impact on deductions
• [61:55–63:23] – Energy, child tax, and estate changes

7. Eide Bailly Services & Expertise

• Broad, National Expertise: Access to specialized teams for cost segregation, cloud accounting, complex planning for group practices and high-growth dental groups, and a vast referral network in the dental industry.
• Direct Contacts:
  • Don Watson (Orange County, CA): 657-279-3273 | dwatson@eidebailly.com
  • Scott Haberman (Fort Collins, CO): 970-999-8932 | shaberman@eidebailly.com

Timestamps:

• [39:10–42:39] – Services, referral capabilities, and contact info

Notable Quotes & Memorable Moments

• On Proactive Tax Planning:
  “The more informed we are as your advisors, the more efficient advice we can provide. Let’s be proactive, not reactive.” – Scott Haberman [19:06]

• On Cybersecurity Risk:
  “It’s not 30 years ago... we just have to be careful with your practice.” – Scott Haberman [12:11]

• On Family Payroll:
  “If you’re going to give money anyway, why not shift it from your tax table to theirs?” – Don Watson [47:12]

• On Cost Segregation:
  “A dollar that you're depreciating 39 years from now is not worth as much as a dollar today... what a cost segregation study does is break down the building into shorter life components, so you can get a deduction today.” – Scott Haberman [50:39]

• On Specialized Dental CPA Value:
  “If you’re not sitting down with a dental-specific CPA...not only can help you with your profitability, but help you save in taxes...we can save you money that you can use to fund retirement, your kids’ college, to buy a house, to pay down your mortgage...” – Art Wiederman [63:34]

Final Takeaways & Calls-to-Action

• Schedule a meeting with a dental-specific CPA before year-end to implement personalized tax planning.
• Take action NOW to implement equipment purchases, optimize practice structure, utilize retirement funding, and review eligibility for new deductions under OB3.
• Pay close attention to cybersecurity vulnerabilities and insurance coverage.
• Don’t ignore opportunities like cost segregation for owned real estate, employing family members, or optimizing your state/local tax deductions.
• Take care of business before December 31; post-year-end options are very limited.

Contact Info for Questions or Consultations:

• Don Watson: 657-279-3273 | dwatson@eidebailly.com
• Scott Haberman: 970-999-8932 | shaberman@eidebailly.com
• Art Wiederman: awiederman@eidebailly.com | 657-279-3243

Recommended Listening

If you’d like more depth on the OB3 Act or other topics, search for prior episodes with Don Watson or visit www.eidebailly.com for the full podcast archive.

In summary:
Proactive, strategic planning—especially with dental-knowledgeable CPAs—can dramatically reduce your tax bill, unlock deductions, legally shift income, and fuel long-term wealth-building for dentists. Take action before year-end to maximize your benefit!