If you’re an oral surgeon with your own practice, you’re doubtless always looking for new and legitimate ways to make the most of your income, while paying as little as possible in taxes.
Although you may be a high earner, you must still manage the cost of your overheads, stay up-to-date with technology, and navigate increasingly complicated tax rules and regulations, which means that you may well be left counting every dollar.
However, with the help of professional tax planning for oral surgeons, you may be able to utilize the Augusta Rule, a tax strategy regularly missed by many in the dental industry.
Let’s take a closer look at the Augusta Rule:
Found in the Internal Revenue Code under Section 280A, the Augusta Rule provision enables homeowners to rent their private residence for a maximum of 14 days every year, without having to report what they’ve made from this on their tax return.
If oral surgeons and dentists were to apply this strategically to their practices, it could become a powerful tool for planning their taxes.
How can the Augusta Rule be applied to dental practices?
Although it’s a simple strategy, executing it while remaining compliant with guidelines from the IRS, isn’t always as straightforward:
Using the Augusta Rule, your practice will pay you a fair and reasonable market rental rate for the use of your home to undertake legitimate activities related to your business, such as associate or board meetings, planning sessions, or even team training events.
Below are the key requirements:
- The period of rental must not be greater than 14 days per calendar year
- The rate of rental must be reasonable and in line with similar properties in your area
- The business being conducted must be legitimate and properly documented
- All meetings and any payments that take place, must be maintained with proper records
The importance of compliance
When implementing the Augusta Rule, you must be sure to:
- Document everything fully and substantially. Who’s attending meetings, the minutes of said meetings, and the business purpose behind the meeting, must all be properly documented.
- Rental prices must be reasonable. Look at similar properties in your area to find out what they’re charging for rent, and document everything that you find. Try to inflate the numbers and you’ll simply make the IRS suspicious.
- Keep it strictly professional. Birthday parties or any kind of family event do not count as business meetings; keep it professional!
- Don’t go past 14 days. On the 15th day, all rental income will need to be reported and a different set of rules will come into play.
Could the Augusta Rule work for you and your practice?
If you’re a dentist or orthodontist who already holds planning sessions and meetings on a regular basis, while paying rent for meeting spaces, then this rule could very well work nicely for you. With the help of accounting for orthodontists, you could redirect your meeting space rental money, to yourself, entirely free of taxes.
For practices that are well-established and which have a robust cashflow, or in which the practice owner is in a higher tax bracket, this strategy typically offers more significant savings.
Why not seek help from a dental accountant to implement the Augusta Rule for your practice, and start thinking about where you will invest all the money!