Starting a Dental Practice: Healthcare Options and Fringe Benefits for Dentists

Fringe benefits for dentists can be beneficial to your dental practice and the dentists who work with you. A fringe benefit is any property or service your dental practice offers employees in exchange for their services. Your dental practice can deduct the cost of fringe benefits as an ordinary and necessary business expense. The dental practice attorneys and tax attorneys at Nardone Limited advise our clients about many fringe benefits that can increase an employee’s compensation (and satisfaction) without increasing your employment tax burden (federal unemployment [“FUTA”], social security, and Medicare). Generally, employees must include the value of fringe benefits in their income for federal tax purposes, but employees can receive some fringe benefits on a pre-tax basis. For more information about compensating associate dentists, see our post about compensation packages here.

Fringe Benefits Your Dental Practice May Consider Offering

While your dental practice is not required to offer fringe benefits, if you would like to increase your employees’ total compensation package without increasing your federal tax burden, you may consider offering one or more of the following fringe benefits to employees:

  • You may offer employees health insurance via a monthly insurance stipend or implement employer-sponsored health insurance for your associate dentists and their dependents. Your dental practice’s payments towards employee health insurance are exempt from income tax withholding, social security, Medicare, and FUTA taxes. Your dental practice may be able to take advantage of the small business healthcare tax credit, see below.
  • While most dental practices do not carry malpractice insurance for their employees, it can reduce the overall tax burden for your employees at no additional cost to your dental practice. If your dental practice pays malpractice premiums for your employees, you can take a federal income tax deduction for the cost and deduct the cost from your employees’ salary, thus lowering the employees’ taxable income.
  • Membership dues to the local dentist association, a continuing education stipend, or time off to attend continuing education are benefits that show you value high-quality employees by supporting your associate dentists’ development as a clinician.
  • Your dental practice may offer paid or unpaid vacation days and sick days to employees
  • There are many different retirement plans you may offer employees. For associate dentists, a pension plan with a vesting period of one to two years is common.
  • Other insurances you may provide for employees include disability insurance, liability insurance, and life insurance.

Small Business Healthcare Tax Credit

If your dental practice provides health insurance for employees this year, you may qualify for the small employer healthcare tax credit. The federal tax credit is better than a tax deduction because you can carry the credit backward and forward to offset income in different tax years. To qualify for the credit (i) you must have fewer than 25 full-time equivalent employees, (ii) your employees’ average wage must be less than $50,000 per year, and (iii) you must cover at least 50{c91082aefe0e580fe546c40af534787b48cfd474f8c9ab8dac50bf49a7a1c43a} of the cost of single healthcare coverage for each of your employees. If you qualify, you can get up to 35{c91082aefe0e580fe546c40af534787b48cfd474f8c9ab8dac50bf49a7a1c43a} of the cost you pay for healthcare coverage back in the form of a federal tax credit. The maximum percentage is set to increase to 50{c91082aefe0e580fe546c40af534787b48cfd474f8c9ab8dac50bf49a7a1c43a} in 2014. The smaller your dental practice is, the larger percentage of tax credit you will be able to get. Additionally, you are entitled to a business expense deduction for any cost of insurance premiums that exceeds the amount of your credit.

 Contact Nardone Limited

Nardone Limited, a Columbus, Ohio law firm, provides specialized dental practice representation across the state of Ohio. The dental practice attorneys and tax attorneys at Nardone Limited represent dentists in such diverse areas as: (i) buying and selling dental practices, (ii) asset purchase agreements, (iii) employment contracts, (iv) labor and employment representation, (v) human resource representation, (vi) Ohio Dental Board representation, (vii) lease agreements, (viii) real estate purchase agreements, (ix) tax planning, and (x) estate planning. The staff at Nardone Limited understand that a dental practice is a business and strive to handle transactions while minimizing each client’s time spent away from the office. Whether your practice is beginning, transitioning, or encountering adversity, Nardone Limited provides the legal and tax planning guidance your practice needs. Contact Nardone Limited today to discuss your practice and how Nardone Limited may help you.