7 Things to Know Before You Start a Solo Dentist Practice

Starting a solo dental practice is exciting, but the tax side can trip you up if you’re not prepared. Unlike working as an associate, you’re now responsible for estimated taxes, self-employment tax, and a whole new set of deductions. Here are 7 things to know before you open your doors, so you can avoid costly mistakes and keep more of what you earn.

1. Your Entity Choice Affects Your Tax Bill

You can operate as a sole proprietor, LLC, S-corp, or C-corp. For most solo dentists, an S-corp is the sweet spot because it lets you split your income into a reasonable salary (subject to payroll taxes) and distributions (not subject to self-employment tax). But that comes with payroll filing requirements.

• Sole Proprietor/LLC (taxed as sole prop): Simplest, but you pay 15.3% self-employment tax on all net income.
• S-corp: You pay yourself a salary (payroll taxes) and take the rest as distributions (no self-employment tax). You must file Form 1120-S and run payroll.
• C-corp: Rarely used for solo practices due to double taxation, unless you plan to reinvest heavily.

Action step: Talk to a CPA who works with dentists. They can run the numbers for your expected income and help you decide. Many new owners choose an S-corp once they expect to net over $60,000-$80,000 per year.

2. You Must Pay Estimated Taxes Quarterly

As an employee, taxes are withheld from each paycheck. As a solo owner, you’re responsible for paying your income tax and self-employment tax quarterly. The IRS requires estimated payments if you expect to owe more than $1,000 in tax.

• Due dates: April 15, June 15, September 15, and January 15 (of the next year).
• How to pay: Use IRS Direct Pay or the Electronic Federal Tax Payment System (EFTPS).
• Penalty: If you underpay, you’ll face an underpayment penalty, even if you settle up at tax time.

Action step: Set aside 25%-35% of each deposit into a separate tax savings account. Use your prior year’s tax liability as a safe harbor to avoid penalties.

3. You Can Deduct a Home Office, But Be Careful

If you have a dedicated space in your home used regularly and exclusively for administrative work (like billing, scheduling, or continuing education), you may qualify for the home office deduction. This can include a portion of your mortgage interest, rent, utilities, and internet.

• Simplified method: Deduct $5 per square foot, up to 300 square feet (max $1,500).
• Regular method: Deduct actual expenses based on the percentage of your home used for business.

Caution: The space must be used exclusively for business. If your “office” is also the guest room, you don’t qualify. Also, if you have an outside office, the home office must be your principal place of business for administrative tasks, which is often true for solo dentists.

Action step: Measure your office space and calculate the percentage of your home’s total square footage. Keep a log of business use.

4. Equipment Purchases Can Be Written Off Immediately

Dental equipment is expensive: chairs, x-ray machines, intraoral cameras. The good news is you can deduct the full cost in the year you buy it, thanks to Section 179 and bonus depreciation.

• Section 179: Deduct up to $1,160,000 (2025 limit) for new or used equipment, as long as the business has taxable income.
• Bonus depreciation: Deduct 80% of the cost of new equipment in 2026 (phasing down to 60% in 2027).

Action step: If you’re planning to buy equipment, consider timing your purchases to maximize deductions. But don’t buy just for the tax break; make sure the equipment is needed.

5. Retirement Plans Offer Big Tax Savings

A solo 401(k) or SEP IRA lets you contribute up to $69,000 (2025 limit) per year, reducing your taxable income. This is one of the most powerful tax tools for a solo owner.

• Solo 401(k): You can contribute as both employer and employee, and you can take a loan.
• SEP IRA: Simpler, but only employer contributions (up to 25% of net income, max $69,000).

Action step: Open a solo 401(k) before December 31 to make contributions for that year. Even a modest contribution can save you thousands in taxes.

6. You Can Deduct Health Insurance Premiums

If you’re self-employed, you can deduct health insurance premiums for yourself, your spouse, and dependents, without itemizing. This deduction reduces your adjusted gross income, which can also lower your Medicare surtax.

• What’s deductible: Medical, dental, and long-term care insurance premiums, as well as Medicare premiums.
• Limitation: You can’t deduct premiums for months you were eligible for an employer-sponsored plan (like your spouse’s).

Action step: Keep records of all premiums paid. Your CPA will need this for your tax return.

7. You Need a Separate Bank Account and Credit Card

Mixing personal and business finances is a common mistake that creates tax headaches. You need a dedicated business checking account and a business credit card to track income and expenses cleanly.

• Why it matters: It makes bookkeeping easier, and it protects your personal assets in case of an audit.
• What to do: Open a business account with a bank that offers low fees (many have free options for small businesses). Use a business credit card for all practice-related purchases.

Action step: If you haven’t already, open a business bank account this week. Transfer your startup costs and deposits through that account only.

FAQ

Q: Should I form an LLC or an S-corp for my solo dental practice?

A: An LLC is easier to set up, but an S-corp can save you self-employment tax on distributions. Most solo dentists choose an S-corp once they expect to net over $60,000-$80,000. Talk to a CPA to see what’s best for your situation.

Q: How much should I set aside for taxes?

A: Plan to set aside 25%-35% of your net income for federal and state taxes. This covers income tax and self-employment tax. Adjust based on your actual tax rate and state.

Q: Can I deduct the cost of dental equipment in the first year?

A: Yes. Section 179 allows you to deduct the full cost of new or used equipment, up to $1,160,000 (2025 limit). Bonus depreciation also applies to new equipment, with 80% deductible in 2026.

Q: What if I miss an estimated tax payment?

A: You’ll likely face an underpayment penalty, but you can minimize it by paying as soon as you realize. The penalty is based on how much you owe and how late you are. Set up a payment plan if needed.

Related guides

• 7 Mistakes Solo Dentist Practices Make in Their First Year
• 7 Questions to Ask Before Buying a Solo Dentist Practice

The bottom line

Starting a solo dental practice is a big step, and taxes are a major part of the business side. By choosing the right entity, paying estimated taxes, and taking advantage of deductions for equipment, retirement, and health insurance, you can keep more of your hard-earned revenue. The key is to plan ahead and work with a CPA who knows dental practices. Take one action this week: open a separate business bank account and set up a tax savings account. Your future self will thank you.