August 22, 2025 • 19 mins
If you're a dentist making over a million dollars and you are NOT working with a Tax Advisor, you're definitely overpaying in taxes.
In this podcast with my wife Marianna, we're breaking down the EXACT tax strategies I use with my dental clients to slash their tax bills by hundreds of thousands of dollars. 🤑
Everyone in America wants to form an LLC but has NO IDEA how flexible they actually are (especially you busy dentists who barely have time to think about these tax strategies). We explain how your LLC can elect to file as an S-Corporation and why this one tax move alone can save you a fortune.
We also cover one of my favorite tax strategies...using real estate to create massive tax deductions. I'll show you what it means to be a "real estate professional" in the IRS's eyes. Marianna calls me out for making it sound "too simple" (she's my wife, so of course she does lol), but honestly? It IS that straightforward when you are working with a Tax Advisor. 🤝
Plus, we cover the retirement tax strategy my clients use when they come to me saying they want to write off something "BIIIIIIG" — and trust me, we're not talking about your basic 401k here (more like defined benefit plans for dentists that create huge tax deductions).
Oh, and that salary vs. distribution split most dentists get wrong? Yeah, we talk about what happens when you mess that strategy up. Spoiler: You either get penalized by the IRS or pay a LOT more taxes than you need to. Neither option is fun.
If you're tired of working hard just to hand half of it to the IRS, this is the video for you.
I've put together this FREE resource for you:
7 Write-Offs Every S-Corporation Business Owner MUST Know
🆓 Download FREE PDF here: https://7taxwriteoffs.com/?el=podcast&htrafficsource=buzzsprout
Ready to start saving money on your taxes?
☎️ Schedule your FREE Tax Advisory Session: https://taxplanningcall.com/?el=podcast&htrafficsource=buzzsprout
💸 Save 100k NOW 💸 - https://save100know.com/access-training?el=podcast&htrafficsource=buzzsprout
🤑 If you want a better payroll app to process and file payroll for your business. Check out Gusto, so easy to use and you get a $100 gift card for signing up using this link: https://gusto.com/r/boris466
P.S. When you sign up for Gusto, you get a $100 Visa gift card
*Disclaimer This material & presentation content is for informational and educational purposes only. This material and presentation content is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Because each individual’s legal, tax, and financial situation is different, specific advice should be tailored to the particular circumstances. For this ...
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
What a lot of people don't realize, especially
dentists, because they're sobusy working and making good
money.
Thank God, you can elect how topay taxes.
Speaker 2 (00:07):
How important is it to get the salary versus
distribution split right?
What happens when it's wrong?
Speaker 1 (00:13):
You pay a lot of taxes to the IRS or you get
penalized by the IRS if it'swrong.
I think a lot of people watchthese videos online and they're
like oh great, I can buy realestate, oh, I can do bonus
depreciation, I can do costsegregation and I can save a lot
of money on taxes.
That is not 100% true, becausenot everybody would qualify for
such a deduction.
Speaker 2 (00:29):
So what makes somebody qualified the?
Speaker 1 (00:31):
biggest problem, I find, is that a lot of business
owners that are in medicalprofession very smart people.
They never got the financialeducation so they don't know.
They rely on their accountantthat is not a tax advisor.
Speaker 2 (00:41):
If you have a tax preparer, you don't have a tax
advisor, and that's really true,boris.
So I'm looking at this next setof questions and it looks like
they're coming in from reallyprofitable dentists.
Speaker 1 (00:53):
Yeah, this looks very interesting.
So it looks like we're going tobe discussing a lot here for
dental owners.
So there's an S-corporationplay like why is S-corporation,
how is it?
Reduced taxes for dental owners?
The split I see a veryinteresting question, the split
between salary versusdistribution.
This is actually really reallycool.
(01:14):
I have a story behind that fora dental owner that was paying
himself $700,000.
So I can definitely help youguys out with that.
Then we also have a questionfrom a high earning dentist
about the real estate that heowns and he puts his dental
practice.
There's actually a really coolstrategy about self-rental, so
we're definitely going to coverthat here.
And, last but not least, wealso have a question about
(01:36):
advanced retirement strategiesfor dental owners.
So this is going to be reallyinteresting, so excited to get
right into it.
So, Mariana, I'll let you readoff those questions.
All right, let's go, let's doit.
Speaker 3 (01:48):
Welcome to the Tax Reduction Podcast for
Money-Making Entrepreneurs withBoris Mushaev.
Boris has helped entrepreneursacross the United States
collectively save millions ofdollars in taxes with the power
of tax planning and advisory.
Planning and advisory the onlyway you, the business owner, can
save money on taxes is by usingproactive tax strategies, and
(02:08):
this podcast is all about savingyou money on taxes.
Boris will share with youin-depth and easy to understand
tax reduction strategies thatyou can implement in your
business within 30 days or less.
Let's jump into today's episode.
Speaker 2 (02:22):
So, boris, I have some questions from a dental
practice.
Okay, so they're asking ifthey're making over a million
dollars, how can structuring asan S corporation reduce their
taxes and what are the commonmistakes that dentists make with
this kind of setup?
Speaker 1 (02:37):
Yeah, so this is a great question, by the way, so a
lot of dentists out there Iwork with a lot of dentists in
our tax advisory firm and wesave them like hundreds of
thousands of dollars in taxesOne of the biggest strategy that
we're able to use for them isbecoming an S corporation.
Because you see, in America,first of all, it's like a new
thing, right, everybody wants toform an LLC.
Everybody wants to form an LLC,which is, by the way, a very
(02:59):
smart strategy when you're firststarting your business.
Now, what a lot of people don'trealize especially dentists,
because they're so busy workingand making good money, thank God
.
What they don't realize andthey don't know their accountant
doesn't tell them is that LLCcan be so flexible.
You can elect how to pay taxesand how to file, exactly, right.
So if you're an LLC which a lotof dental practices they are or
(03:24):
some states require them to bea professional liability company
, like a PLLC, because they'reprofessionals Usually it's for
doctors, attorneys andaccountants okay, but that LLC
can make an election to filetaxes as an S corporation.
What happens if you don't?
If you don't, then the IRS sayslook, legally you're still an
LLC, you're legally protectedfrom the creditors, but your
(03:46):
entire net profit is going to berecorded on your personal taxes
, on what's called Schedule C.
And why is that a problem?
Because not only are you goingto end up paying federal taxes,
but also state income taxes,especially if you're like in
California and New York, whichis like a very, very high income
tax state.
You're also going to pay what'scalled self-employment tax,
which is Social Security,medicare tax double that.
(04:08):
Let me explain to you what thatmeans.
You ever had a W-2 paycheck?
Speaker 2 (04:13):
job?
Yeah, I did.
What's your background?
I used to be a teacher before.
Speaker 1 (04:17):
So introduce yourself , right, guys.
This is Mariana, my wife, okay,so she's not here just to look
pretty.
She's here to ask me questionsthat you guys ask.
But you were a teacher and ifyou remember those days when you
received your paycheck, therewas Social Security Medicare
withholdings, right, yes, so didyou know that every time they
withhold Social SecurityMedicare tax from you, the
employer, the school that hiredyou, had to Withhold exact same
(04:39):
amount?
Speaker 2 (04:40):
Well, I learned only Much later right.
Speaker 1 (04:43):
You learned much later, after watching all my
videos right yes From yourhusband.
So that's what happens when youreport your net profit on your
Schedule C, not only are youpaying Social Security and
Medicare tax as an employer byemploying yourself, but also as
an employee employing yourself,right?
So if you're a dental practiceowner and you have really high
profits and you are filing yourtax as an LLC, not as an S-Corp,
(05:08):
you are missing out on thatstrategy right there where you
are paying self-employment taxdouble on the entire profit.
Now, if you become anS-Corporation, what's going to
happen is that you can stop andyou can stop when I say stop,
you can stop paying thatself-employment tax on that
entire net profit.
What do you do instead?
So you pay yourself a W-2salary.
(05:29):
So let's say we've got a dentalpractice making $800,000 in net
profit, okay, you can payyourself $150,000 reasonable
compensation.
Again, that depends on whatstate you're located, what type
of work you do in the dentalpractice.
You know you're not a hundredpercent dentist.
That day you could be pickingup phones, you could be doing
billables, you know all of thatstuff and you only pay
(05:50):
self-employment taxes.
And that $150,000, the entirething of $650,000, not subject
to dividend taxation, becausethere's no double taxation with
an S corporation and not subjectto payroll taxes.
And, shockingly, a lot ofpeople don't realize that, yes,
it is your money in yourS-corporation and you can take
(06:12):
it out as a distribution.
So that's the strategy aboutS-corporations for our dentist
clients.
Speaker 2 (06:20):
That was great.
Speaker 1 (06:21):
Yeah, thanks.
What do we got next?
Speaker 2 (06:23):
Okay, boris.
So here's another question.
We have a high-earning dentistwho's using real estate Okay,
and he owns his own office.
Speaker 1 (06:32):
Nice, love this.
Okay, keep going.
Speaker 2 (06:35):
He's creating extra deductions and building wealth
at the same time, and he'sasking if he can do that.
Speaker 1 (06:43):
Yes, he's asking if he can create extra deductions
and build wealth.
Yes, so this is really coolstrategy for dental practices so
owning your own building whereyou're going to put your dental
practice.
So we have like, for example,we are in an office building for
our tax advisory firm, but youknow, one day we want to buy a
(07:04):
building for a tax advisory firm.
Why?
For the same reason I'm aboutto explain why this dentist can
actually do this because it is agreat tax strategy.
Now what's?
Speaker 2 (07:11):
the tax.
It's a great opportunity forthem.
Speaker 1 (07:14):
Yeah, that's okay.
Don't be shy, mariana.
It is a great opportunity,right?
But no, but in reality, though,let me just explain something.
A lot of people watch thesevideos online and they're like,
oh great, I can buy real estate.
Oh, I can do bonus depreciation, I can do cost segregation and
I can save a lot of money ontaxes.
That is partially true.
That is not 100% true, becausenot everybody would qualify for
(07:37):
such a deduction.
Speaker 2 (07:39):
So what makes?
Speaker 1 (07:40):
somebody qualify so let's talk about this for a
second right.
So let's say, mariana, you goout and buy real estate and you
bought a property, right?
And we're going to tie thisback by the way, how this dental
practice with its own buildingcan use this strategy.
So hang on with me, you'regoing to go out and you're going
to buy a building right now, ora single family home, whatever
you want, right?
It's one thing you probablywouldn't maximize your
(08:02):
deductions.
The biggest thing that you cando right now with a big,
beautiful bill is also usecross-aggregation to accelerate
depreciation Now what does thatmean?
Speaker 2 (08:10):
I was just going to ask you that.
Speaker 1 (08:12):
What does that mean?
If you buy a building for amillion dollars, right?
So let's just say it's buildingnet of land a million dollars,
okay, about net of land amillion dollars, about 25% of
that roughly can be deducted inthe first year, but it's going
to produce really nice lossesfor you, mariana.
Can you take those losses?
The answer is depends.
Are you a real estateprofessional by the IRS
definition?
So what is that?
(08:33):
What is a real estateprofessional?
Just in a nutshell for thepurposes of this video, that is,
if you're spending more than50% of your time in real estate
and at least 750 hours, and ofcourse you have to actively or
materially participate in thatproperty that you own, like
managing.
Managing, you have to meet thehours 500 hour participation
(08:55):
rule, material participation.
But you, mariana, won't be ableto take that loss because you
have a day job, for example,shooting videos with me like
this and asking me questions.
You do this more than 50% ofyour time.
But this dental owner that'sasking this question this
applies to you, by the way.
But if you buy your ownbuilding in which you're going
to house your dental practice,like if he does that, then guess
(09:17):
what those passive loss rulelimitations do not apply.
That's it.
So you can now buy a building,be your own tenant.
So buy it in a separate LLC,pay rent to yourself, you pay
rent to yourself.
Now you can do accelerateddepreciation using the cost
segregation.
The bonus depreciation becameeven more accessible, so to
(09:38):
speak, with a big, beautifulbill that was signed into law on
July 4th.
So a dental practice owning hisown practice I mean, excuse me,
yes, owning his own practice,owning his own building, being
his own tenant in that buildingcan now basically file taxes.
And you've got to have acompetent tax preparer.
If you don't have it, getyourself a tax advisor.
(09:58):
Because when you do this, whatyou're basically doing legally
with following the IRS tax code,of course, and properly filing
tax return you're going towhat's called combine these two
activities your real estate andyour business and you're going
to put a statement on the taxreturn that says hey, I am
electing, so combine both ofthese activities.
So the loss from this realestate, the cost segregation
(10:21):
which you own your dentalpractice in, can now be deducted
against the net profit of yourdental practice.
So that is one of the greatways to create yourself Create.
See how I use the word create.
Create yourself additional taxdeductions.
All right, I hope that washelpful.
Speaker 2 (10:40):
That was helpful.
You make it sound so simple.
Speaker 1 (10:44):
I wanted to be a professor.
Believe it or not, I know well.
Not a professor, but likeadjunct professor.
Right, that's what they'recalled.
Speaker 3 (10:51):
Like somebody who's not a professor but teaches.
Speaker 1 (10:54):
But then I realized that, no, I think I want to make
a lot more money than anadjunct professor.
Speaker 2 (10:59):
I think you're educating a lot of people now on
tax strategies and I think thatputs you just right up there.
Speaker 1 (11:05):
Thank you To my wife.
Of course she would say it, Imean it.
All right, let's go to the nextquestion.
What advanced right?
What do we got here?
Speaker 2 (11:12):
Okay.
So what are the advancedretirement strategies that
dentists can use to save ontaxes while aggressively
building for retirement?
Speaker 1 (11:22):
Wow, okay.
So I want to be very, veryclear on this, because if you're
a dentist especially like I'vegot a client right now, a
dentist he's got five employeesI think it's him himself he's
got five employees.
And he's like Boris, I want towrite off something big, like
big, give me something big.
Right, I'm like okay, I'm like401K.
(11:45):
He's like yeah, I love 401K, Iwant to do retirement.
I'm like but you want somethingbig.
So how about we do definedbenefit plan?
He's like oh, what is that?
Defined benefit plan isbasically 401K and steroids.
Yes, so with a 401k you can maxout your employee deferral,
which is whatever you put awayfrom your W-2 paycheck $23,500,
plus whatever the companymatches you.
(12:06):
Okay, if you want to startmatching yourself more, you have
to do it for all the employees.
It becomes a little costly.
The benefit is not there, butthe fine benefit plan basically
says you know what?
Let me give you an example.
This could be a good example.
So big companies right, let'sjust use Apple.
I don't know if Apple does it,I'm sure they do it, but just
going to use a company likeApple, right, they have their
(12:26):
own pension fund.
A big company has their ownpension fund, meaning say it's
not a 401k, it's their ownpension fund.
They've built that pension fundright.
So defined benefit plan issomething where you build your
own pension fund, so to speakfor your employees.
Later on you can.
Of course it could survive, notsurvive whatever it is but
you're building that pensionplan.
It's like its own separatething.
You can put away up to $225,000for an owner.
(12:50):
So my dentist client found thatsuper helpful.
Actually, we just did it alsofor a pharmacy client.
He's like man, this is great,it's pretty big.
Yeah, it's pretty big becausenow you've got employees, now
you have to match a little bitmore for your employees.
You have to give more money tothe retirement for your
employees, but that's okay.
You reward them, you open up anice benefit package for them,
but overall tax savings on whatyou're putting away for yourself
(13:13):
and for them, it's still a lotmore than what it costs you out
of pocket to also cover youremployees, because you cannot
discriminate.
So that I would say speak toyour financial advisor or
honestly, like I don't even knowif financial advisors are
always the best for this,because sometimes they start
pushing other products withinthat.
Anyways, let's not get startedon that.
I think what you need is a taxadvisor.
Speak to the tax advisor, belike hey, I've heard Boris and
(13:36):
he said to do this and just dothat.
All right, cool, I, he said todo this and just do that All
right.
Cool, I think we can squeeze inone more.
I see the next question from adentist and I think this
question I definitely want tocover today.
Speaker 3 (13:51):
If you have a tax preparer and you do not have a
tax advisor, the only way youcan save money on taxes is by
using proactive tax planningstrategies that only a tax
advisor can give you.
Bora's put together a free PDFfor you, the business owner
Seven tax write-offs everyS-corporation business owner
must know.
In this PDF you can find seventax strategies that you can
start using in your business toinstantly start saving money on
(14:13):
taxes.
Click on the link in thedescription below for a free
download.
Speaker 2 (14:18):
So this dentist is making over a million dollars.
Speaker 1 (14:20):
Ooh, Another million dollar.
Dentist Love it.
Speaker 2 (14:23):
And he wants to know how important is it to get the
salary versus distribution splitright?
Speaker 1 (14:29):
Yeah.
Speaker 2 (14:30):
And there's a follow-up, like what happens
when it's wrong.
Speaker 1 (14:33):
Yeah, you pay a lot of tax to the IRS so you get
penalized by the IRS if it'swrong.
Okay, now let me tell you astory of a dentist client.
So I got a dentist clientrecently enrolled to work for a
tax advisory service with us andhe made about $800,000
take-home pay last year.
I'm like great.
So I'm looking at hisS-Corporation tax and he's an
(14:54):
S-Corporation.
That's good.
We already talked about anS-Corp, right.
So he did that part correct andhis profit is zero.
But he took home about $800,000.
How does that make sense?
Yeah, so I'm like then I lookat his W-2 and I see an $800,000
W-2.
I'm like, whoa, what is going on?
I'm like why do you payyourself so high?
He's like I don't know, that'swhat my accountant tells me to
do.
And I've seen If you've gotthat local accountant that
(15:18):
you've outgrown you startedworking with when you were first
doing it.
You sent 40 taxes and now youopened up your business and this
happens to a lot of businessowners.
He's like, yeah, this is whatmy accountant kind of
recommended and he said leave $0in a business account, take no
distributions.
I'm like, well, what's the pointof becoming an S corporation?
Might as well file as a singlemember, llc, right?
(15:39):
So I said we need to redo this.
He's like well, boris, wait.
He got worried.
He's like Boris wait, can I?
What's going to happen if I'mgoing to pay myself?
I think his salary was likereasonable compensations, like
in New York.
I think it was $240,000, if Iremember correctly.
He's like what about the restof the money?
Like I need that money.
I know he likes to liveluxuriously, so he drives a
(16:00):
Ferrari, I believe last.
I remember right.
Don't ask me how I know thatit's not on his taxes.
Don't worry, it could be.
We could put it on his taxeslegally, legally, right, of
course.
Speaker 3 (16:11):
Of course.
Speaker 1 (16:13):
He's got to have a business purpose, but anyways,
that's besides the point.
That's besides the point.
So he's like, boris, I need allthis money.
I'm like you can take outdistributions.
He's like, well, is it allowed?
I'm like, yeah, he's like, andwhat about taxes?
I'm like, yeah, you'll payquarterly estimated taxes, but
you're not going to pay thatadditional medicare tax on that
(16:34):
money.
I mean, think about it.
I think it was that we're leftwith about 600,000 to play with
the medicare tax on that betweenemployer and employee, if it's
in a W-2, is 3%, 2.9%.
You multiply that by about$600,000.
That's $18,000.
It was just like just changingthat little thing on a damn W-2.
And you've just got to payyourself a reasonable
compensation, like it's in theIRS tax code.
(16:54):
If you have an S corporationand you're making a buttload of
money which is good for you, theIRS says you don't have to take
it all out as a salary.
Reasonable compensation is goodenough.
Speaker 2 (17:07):
I think people also don't realize that the money is
still there.
It's theirs, yes, it's theirmoney.
Speaker 1 (17:12):
Yeah, they don't realize, but they don't know.
You can't blame the businessowner for this.
The biggest problem, I find, isthat a lot of business owners
that are in medical professionthey are very smart people, Very
smart.
My brother went to medicalschool.
I think he's even smarter thanme.
It's super smart, but they justwork.
(17:35):
No, they're in medical schoolso much and then they get into
the hospitals whatever they dorotations and into the field
right, the financial.
They never got the financialeducation so they don't know
Right and they rely on theiraccountant.
That is not a tax advisor,Right?
So if you want to get yourfinances straight, if you want
to pay less money in taxes, youwant to be proactive.
(17:56):
You want somebody to help youachieve that goal.
You got to get yourself a taxadvisor.
Speaker 2 (18:00):
There's a line you always say and I love it If you
have a tax preparer, you don'thave a tax advisor, and that's
really true.
Speaker 1 (18:11):
That's correct A hundred percent.
If you have a tax preparer, youprobably outgrew him.
He's not a tax advisor, he'snot doing tax planning, he's not
being proactive.
He is speaking to you once ayear and when that tax preparer
is busy during tax season,you'll get lucky if you get a
reply from him once a week.
Yep, all right.
Ladies and gentlemen, I hopethis was helpful for our dentist
audience over here.
And yeah, till the next time,till the next time, thanks so
(18:33):
much, it was great you askedexcellent questions.
Speaker 2 (18:35):
Listen, they ask the questions, we just answer them.
Speaker 1 (18:39):
All right till the next time, Thank you.
Speaker 3 (18:41):
That's it for today's episode.
Be sure to check out thedescription below for some free
tax reduction resources thatBoris put together for you.
If you're ready to work with atax advisor on your tax planning
, be sure to schedule your callby heading over to
wwwtaxplanningcallcom.
That's wwwtaxplanningcallcom.
And be sure to subscribe to ourpodcast to be notified when the
(19:05):
next strategy is released.
What a lot of people don't realize, especially
dentists, because they're sobusy working and making good
money.
Thank God, you can elect how topay taxes.
Speaker 2 (00:07):
How important is it to get the salary versus
distribution split right?
What happens when it's wrong?
Speaker 1 (00:13):
You pay a lot of taxes to the IRS or you get
penalized by the IRS if it'swrong.
I think a lot of people watchthese videos online and they're
like oh great, I can buy realestate, oh, I can do bonus
depreciation, I can do costsegregation and I can save a lot
of money on taxes.
That is not 100% true, becausenot everybody would qualify for
such a deduction.
Speaker 2 (00:29):
So what makes somebody qualified the?
Speaker 1 (00:31):
biggest problem, I find, is that a lot of business
owners that are in medicalprofession very smart people.
They never got the financialeducation so they don't know.
They rely on their accountantthat is not a tax advisor.
Speaker 2 (00:41):
If you have a tax preparer, you don't have a tax
advisor, and that's really true,boris.
So I'm looking at this next setof questions and it looks like
they're coming in from reallyprofitable dentists.
Speaker 1 (00:53):
Yeah, this looks very interesting.
So it looks like we're going tobe discussing a lot here for
dental owners.
So there's an S-corporationplay like why is S-corporation,
how is it?
Reduced taxes for dental owners?
The split I see a veryinteresting question, the split
between salary versusdistribution.
This is actually really reallycool.
(01:14):
I have a story behind that fora dental owner that was paying
himself $700,000.
So I can definitely help youguys out with that.
Then we also have a questionfrom a high earning dentist
about the real estate that heowns and he puts his dental
practice.
There's actually a really coolstrategy about self-rental, so
we're definitely going to coverthat here.
And, last but not least, wealso have a question about
(01:36):
advanced retirement strategiesfor dental owners.
So this is going to be reallyinteresting, so excited to get
right into it.
So, Mariana, I'll let you readoff those questions.
All right, let's go, let's doit.
Speaker 3 (01:48):
Welcome to the Tax Reduction Podcast for
Money-Making Entrepreneurs withBoris Mushaev.
Boris has helped entrepreneursacross the United States
collectively save millions ofdollars in taxes with the power
of tax planning and advisory.
Planning and advisory the onlyway you, the business owner, can
save money on taxes is by usingproactive tax strategies, and
(02:08):
this podcast is all about savingyou money on taxes.
Boris will share with youin-depth and easy to understand
tax reduction strategies thatyou can implement in your
business within 30 days or less.
Let's jump into today's episode.
Speaker 2 (02:22):
So, boris, I have some questions from a dental
practice.
Okay, so they're asking ifthey're making over a million
dollars, how can structuring asan S corporation reduce their
taxes and what are the commonmistakes that dentists make with
this kind of setup?
Speaker 1 (02:37):
Yeah, so this is a great question, by the way, so a
lot of dentists out there Iwork with a lot of dentists in
our tax advisory firm and wesave them like hundreds of
thousands of dollars in taxesOne of the biggest strategy that
we're able to use for them isbecoming an S corporation.
Because you see, in America,first of all, it's like a new
thing, right, everybody wants toform an LLC.
Everybody wants to form an LLC,which is, by the way, a very
(02:59):
smart strategy when you're firststarting your business.
Now, what a lot of people don'trealize especially dentists,
because they're so busy workingand making good money, thank God
.
What they don't realize andthey don't know their accountant
doesn't tell them is that LLCcan be so flexible.
You can elect how to pay taxesand how to file, exactly, right.
So if you're an LLC which a lotof dental practices they are or
(03:24):
some states require them to bea professional liability company
, like a PLLC, because they'reprofessionals Usually it's for
doctors, attorneys andaccountants okay, but that LLC
can make an election to filetaxes as an S corporation.
What happens if you don't?
If you don't, then the IRS sayslook, legally you're still an
LLC, you're legally protectedfrom the creditors, but your
(03:46):
entire net profit is going to berecorded on your personal taxes
, on what's called Schedule C.
And why is that a problem?
Because not only are you goingto end up paying federal taxes,
but also state income taxes,especially if you're like in
California and New York, whichis like a very, very high income
tax state.
You're also going to pay what'scalled self-employment tax,
which is Social Security,medicare tax double that.
(04:08):
Let me explain to you what thatmeans.
You ever had a W-2 paycheck?
Speaker 2 (04:13):
job?
Yeah, I did.
What's your background?
I used to be a teacher before.
Speaker 1 (04:17):
So introduce yourself , right, guys.
This is Mariana, my wife, okay,so she's not here just to look
pretty.
She's here to ask me questionsthat you guys ask.
But you were a teacher and ifyou remember those days when you
received your paycheck, therewas Social Security Medicare
withholdings, right, yes, so didyou know that every time they
withhold Social SecurityMedicare tax from you, the
employer, the school that hiredyou, had to Withhold exact same
(04:39):
amount?
Speaker 2 (04:40):
Well, I learned only Much later right.
Speaker 1 (04:43):
You learned much later, after watching all my
videos right yes From yourhusband.
So that's what happens when youreport your net profit on your
Schedule C, not only are youpaying Social Security and
Medicare tax as an employer byemploying yourself, but also as
an employee employing yourself,right?
So if you're a dental practiceowner and you have really high
profits and you are filing yourtax as an LLC, not as an S-Corp,
(05:08):
you are missing out on thatstrategy right there where you
are paying self-employment taxdouble on the entire profit.
Now, if you become anS-Corporation, what's going to
happen is that you can stop andyou can stop when I say stop,
you can stop paying thatself-employment tax on that
entire net profit.
What do you do instead?
So you pay yourself a W-2salary.
(05:29):
So let's say we've got a dentalpractice making $800,000 in net
profit, okay, you can payyourself $150,000 reasonable
compensation.
Again, that depends on whatstate you're located, what type
of work you do in the dentalpractice.
You know you're not a hundredpercent dentist.
That day you could be pickingup phones, you could be doing
billables, you know all of thatstuff and you only pay
(05:50):
self-employment taxes.
And that $150,000, the entirething of $650,000, not subject
to dividend taxation, becausethere's no double taxation with
an S corporation and not subjectto payroll taxes.
And, shockingly, a lot ofpeople don't realize that, yes,
it is your money in yourS-corporation and you can take
(06:12):
it out as a distribution.
So that's the strategy aboutS-corporations for our dentist
clients.
Speaker 2 (06:20):
That was great.
Speaker 1 (06:21):
Yeah, thanks.
What do we got next?
Speaker 2 (06:23):
Okay, boris.
So here's another question.
We have a high-earning dentistwho's using real estate Okay,
and he owns his own office.
Speaker 1 (06:32):
Nice, love this.
Okay, keep going.
Speaker 2 (06:35):
He's creating extra deductions and building wealth
at the same time, and he'sasking if he can do that.
Speaker 1 (06:43):
Yes, he's asking if he can create extra deductions
and build wealth.
Yes, so this is really coolstrategy for dental practices so
owning your own building whereyou're going to put your dental
practice.
So we have like, for example,we are in an office building for
our tax advisory firm, but youknow, one day we want to buy a
(07:04):
building for a tax advisory firm.
Why?
For the same reason I'm aboutto explain why this dentist can
actually do this because it is agreat tax strategy.
Now what's?
Speaker 2 (07:11):
the tax.
It's a great opportunity forthem.
Speaker 1 (07:14):
Yeah, that's okay.
Don't be shy, mariana.
It is a great opportunity,right?
But no, but in reality, though,let me just explain something.
A lot of people watch thesevideos online and they're like,
oh great, I can buy real estate.
Oh, I can do bonus depreciation, I can do cost segregation and
I can save a lot of money ontaxes.
That is partially true.
That is not 100% true, becausenot everybody would qualify for
(07:37):
such a deduction.
Speaker 2 (07:39):
So what makes?
Speaker 1 (07:40):
somebody qualify so let's talk about this for a
second right.
So let's say, mariana, you goout and buy real estate and you
bought a property, right?
And we're going to tie thisback by the way, how this dental
practice with its own buildingcan use this strategy.
So hang on with me, you'regoing to go out and you're going
to buy a building right now, ora single family home, whatever
you want, right?
It's one thing you probablywouldn't maximize your
(08:02):
deductions.
The biggest thing that you cando right now with a big,
beautiful bill is also usecross-aggregation to accelerate
depreciation Now what does thatmean?
Speaker 2 (08:10):
I was just going to ask you that.
Speaker 1 (08:12):
What does that mean?
If you buy a building for amillion dollars, right?
So let's just say it's buildingnet of land a million dollars,
okay, about net of land amillion dollars, about 25% of
that roughly can be deducted inthe first year, but it's going
to produce really nice lossesfor you, mariana.
Can you take those losses?
The answer is depends.
Are you a real estateprofessional by the IRS
definition?
So what is that?
(08:33):
What is a real estateprofessional?
Just in a nutshell for thepurposes of this video, that is,
if you're spending more than50% of your time in real estate
and at least 750 hours, and ofcourse you have to actively or
materially participate in thatproperty that you own, like
managing.
Managing, you have to meet thehours 500 hour participation
(08:55):
rule, material participation.
But you, mariana, won't be ableto take that loss because you
have a day job, for example,shooting videos with me like
this and asking me questions.
You do this more than 50% ofyour time.
But this dental owner that'sasking this question this
applies to you, by the way.
But if you buy your ownbuilding in which you're going
to house your dental practice,like if he does that, then guess
(09:17):
what those passive loss rulelimitations do not apply.
That's it.
So you can now buy a building,be your own tenant.
So buy it in a separate LLC,pay rent to yourself, you pay
rent to yourself.
Now you can do accelerateddepreciation using the cost
segregation.
The bonus depreciation becameeven more accessible, so to
(09:38):
speak, with a big, beautifulbill that was signed into law on
July 4th.
So a dental practice owning hisown practice I mean, excuse me,
yes, owning his own practice,owning his own building, being
his own tenant in that buildingcan now basically file taxes.
And you've got to have acompetent tax preparer.
If you don't have it, getyourself a tax advisor.
(09:58):
Because when you do this, whatyou're basically doing legally
with following the IRS tax code,of course, and properly filing
tax return you're going towhat's called combine these two
activities your real estate andyour business and you're going
to put a statement on the taxreturn that says hey, I am
electing, so combine both ofthese activities.
So the loss from this realestate, the cost segregation
(10:21):
which you own your dentalpractice in, can now be deducted
against the net profit of yourdental practice.
So that is one of the greatways to create yourself Create.
See how I use the word create.
Create yourself additional taxdeductions.
All right, I hope that washelpful.
Speaker 2 (10:40):
That was helpful.
You make it sound so simple.
Speaker 1 (10:44):
I wanted to be a professor.
Believe it or not, I know well.
Not a professor, but likeadjunct professor.
Right, that's what they'recalled.
Speaker 3 (10:51):
Like somebody who's not a professor but teaches.
Speaker 1 (10:54):
But then I realized that, no, I think I want to make
a lot more money than anadjunct professor.
Speaker 2 (10:59):
I think you're educating a lot of people now on
tax strategies and I think thatputs you just right up there.
Speaker 1 (11:05):
Thank you To my wife.
Of course she would say it, Imean it.
All right, let's go to the nextquestion.
What advanced right?
What do we got here?
Speaker 2 (11:12):
Okay.
So what are the advancedretirement strategies that
dentists can use to save ontaxes while aggressively
building for retirement?
Speaker 1 (11:22):
Wow, okay.
So I want to be very, veryclear on this, because if you're
a dentist especially like I'vegot a client right now, a
dentist he's got five employeesI think it's him himself he's
got five employees.
And he's like Boris, I want towrite off something big, like
big, give me something big.
Right, I'm like okay, I'm like401K.
(11:45):
He's like yeah, I love 401K, Iwant to do retirement.
I'm like but you want somethingbig.
So how about we do definedbenefit plan?
He's like oh, what is that?
Defined benefit plan isbasically 401K and steroids.
Yes, so with a 401k you can maxout your employee deferral,
which is whatever you put awayfrom your W-2 paycheck $23,500,
plus whatever the companymatches you.
(12:06):
Okay, if you want to startmatching yourself more, you have
to do it for all the employees.
It becomes a little costly.
The benefit is not there, butthe fine benefit plan basically
says you know what?
Let me give you an example.
This could be a good example.
So big companies right, let'sjust use Apple.
I don't know if Apple does it,I'm sure they do it, but just
going to use a company likeApple, right, they have their
(12:26):
own pension fund.
A big company has their ownpension fund, meaning say it's
not a 401k, it's their ownpension fund.
They've built that pension fundright.
So defined benefit plan issomething where you build your
own pension fund, so to speakfor your employees.
Later on you can.
Of course it could survive, notsurvive whatever it is but
you're building that pensionplan.
It's like its own separatething.
You can put away up to $225,000for an owner.
(12:50):
So my dentist client found thatsuper helpful.
Actually, we just did it alsofor a pharmacy client.
He's like man, this is great,it's pretty big.
Yeah, it's pretty big becausenow you've got employees, now
you have to match a little bitmore for your employees.
You have to give more money tothe retirement for your
employees, but that's okay.
You reward them, you open up anice benefit package for them,
but overall tax savings on whatyou're putting away for yourself
(13:13):
and for them, it's still a lotmore than what it costs you out
of pocket to also cover youremployees, because you cannot
discriminate.
So that I would say speak toyour financial advisor or
honestly, like I don't even knowif financial advisors are
always the best for this,because sometimes they start
pushing other products withinthat.
Anyways, let's not get startedon that.
I think what you need is a taxadvisor.
Speak to the tax advisor, belike hey, I've heard Boris and
(13:36):
he said to do this and just dothat.
All right, cool, I, he said todo this and just do that All
right.
Cool, I think we can squeeze inone more.
I see the next question from adentist and I think this
question I definitely want tocover today.
Speaker 3 (13:51):
If you have a tax preparer and you do not have a
tax advisor, the only way youcan save money on taxes is by
using proactive tax planningstrategies that only a tax
advisor can give you.
Bora's put together a free PDFfor you, the business owner
Seven tax write-offs everyS-corporation business owner
must know.
In this PDF you can find seventax strategies that you can
start using in your business toinstantly start saving money on
(14:13):
taxes.
Click on the link in thedescription below for a free
download.
Speaker 2 (14:18):
So this dentist is making over a million dollars.
Speaker 1 (14:20):
Ooh, Another million dollar.
Dentist Love it.
Speaker 2 (14:23):
And he wants to know how important is it to get the
salary versus distribution splitright?
Speaker 1 (14:29):
Yeah.
Speaker 2 (14:30):
And there's a follow-up, like what happens
when it's wrong.
Speaker 1 (14:33):
Yeah, you pay a lot of tax to the IRS so you get
penalized by the IRS if it'swrong.
Okay, now let me tell you astory of a dentist client.
So I got a dentist clientrecently enrolled to work for a
tax advisory service with us andhe made about $800,000
take-home pay last year.
I'm like great.
So I'm looking at hisS-Corporation tax and he's an
(14:54):
S-Corporation.
That's good.
We already talked about anS-Corp, right.
So he did that part correct andhis profit is zero.
But he took home about $800,000.
How does that make sense?
Yeah, so I'm like then I lookat his W-2 and I see an $800,000
W-2.
I'm like, whoa, what is going on?
I'm like why do you payyourself so high?
He's like I don't know, that'swhat my accountant tells me to
do.
And I've seen If you've gotthat local accountant that
(15:18):
you've outgrown you startedworking with when you were first
doing it.
You sent 40 taxes and now youopened up your business and this
happens to a lot of businessowners.
He's like, yeah, this is whatmy accountant kind of
recommended and he said leave $0in a business account, take no
distributions.
I'm like, well, what's the pointof becoming an S corporation?
Might as well file as a singlemember, llc, right?
(15:39):
So I said we need to redo this.
He's like well, boris, wait.
He got worried.
He's like Boris wait, can I?
What's going to happen if I'mgoing to pay myself?
I think his salary was likereasonable compensations, like
in New York.
I think it was $240,000, if Iremember correctly.
He's like what about the restof the money?
Like I need that money.
I know he likes to liveluxuriously, so he drives a
(16:00):
Ferrari, I believe last.
I remember right.
Don't ask me how I know thatit's not on his taxes.
Don't worry, it could be.
We could put it on his taxeslegally, legally, right, of
course.
Speaker 3 (16:11):
Of course.
Speaker 1 (16:13):
He's got to have a business purpose, but anyways,
that's besides the point.
That's besides the point.
So he's like, boris, I need allthis money.
I'm like you can take outdistributions.
He's like, well, is it allowed?
I'm like, yeah, he's like, andwhat about taxes?
I'm like, yeah, you'll payquarterly estimated taxes, but
you're not going to pay thatadditional medicare tax on that
(16:34):
money.
I mean, think about it.
I think it was that we're leftwith about 600,000 to play with
the medicare tax on that betweenemployer and employee, if it's
in a W-2, is 3%, 2.9%.
You multiply that by about$600,000.
That's $18,000.
It was just like just changingthat little thing on a damn W-2.
And you've just got to payyourself a reasonable
compensation, like it's in theIRS tax code.
(16:54):
If you have an S corporationand you're making a buttload of
money which is good for you, theIRS says you don't have to take
it all out as a salary.
Reasonable compensation is goodenough.
Speaker 2 (17:07):
I think people also don't realize that the money is
still there.
It's theirs, yes, it's theirmoney.
Speaker 1 (17:12):
Yeah, they don't realize, but they don't know.
You can't blame the businessowner for this.
The biggest problem, I find, isthat a lot of business owners
that are in medical professionthey are very smart people, Very
smart.
My brother went to medicalschool.
I think he's even smarter thanme.
It's super smart, but they justwork.
(17:35):
No, they're in medical schoolso much and then they get into
the hospitals whatever they dorotations and into the field
right, the financial.
They never got the financialeducation so they don't know
Right and they rely on theiraccountant.
That is not a tax advisor,Right?
So if you want to get yourfinances straight, if you want
to pay less money in taxes, youwant to be proactive.
(17:56):
You want somebody to help youachieve that goal.
You got to get yourself a taxadvisor.
Speaker 2 (18:00):
There's a line you always say and I love it If you
have a tax preparer, you don'thave a tax advisor, and that's
really true.
Speaker 1 (18:11):
That's correct A hundred percent.
If you have a tax preparer, youprobably outgrew him.
He's not a tax advisor, he'snot doing tax planning, he's not
being proactive.
He is speaking to you once ayear and when that tax preparer
is busy during tax season,you'll get lucky if you get a
reply from him once a week.
Yep, all right.
Ladies and gentlemen, I hopethis was helpful for our dentist
audience over here.
And yeah, till the next time,till the next time, thanks so
(18:33):
much, it was great you askedexcellent questions.
Speaker 2 (18:35):
Listen, they ask the questions, we just answer them.
Speaker 1 (18:39):
All right till the next time, Thank you.
Speaker 3 (18:41):
That's it for today's episode.
Be sure to check out thedescription below for some free
tax reduction resources thatBoris put together for you.
If you're ready to work with atax advisor on your tax planning
, be sure to schedule your callby heading over to
wwwtaxplanningcallcom.
That's wwwtaxplanningcallcom.
And be sure to subscribe to ourpodcast to be notified when the
(19:05):
next strategy is released.
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