Orthodontist Tax Playbook
The complete tax planning guide for orthodontist practice owners — covering S-Corp structuring, retirement plans with employees, equipment expensing, QBI SSTB limitations, and practice sale planning for 2026.
The Orthodontist Tax Landscape
Orthodontists are among the highest-earning dental specialists, with median net income ranging from $280,000 to $480,000 depending on practice size, geography, and ownership structure. Unlike general dentists who may have significant overhead, orthodontists typically operate high-margin practices with relatively low supply costs — making tax planning the single largest lever for improving net after-tax income.
The typical orthodontist owns their practice as an S-Corp or Professional Corporation, employs 5–15 staff, and generates $1.2M–$3M in gross revenue with $300,000–$500,000 in net owner income. This structure creates both planning opportunities (retirement plan contributions, vehicle deductions, home office) and compliance obligations (payroll taxes, reasonable compensation, fringe benefits for employees).
The §199A qualified business income deduction is available to orthodontists — but with an important caveat. Dentistry is an SSTB under the regulations, meaning the QBI deduction phases out at the 2026 threshold of $394,600 (MFJ) and is eliminated above $494,600 (MFJ). Orthodontists with net income above $494,600 receive no QBI deduction on their practice income. Retirement plan contributions are the primary tool for reducing taxable income below the phase-out threshold.
Practice Entity Structure and S-Corp Election
Most orthodontists already operate through a professional corporation or LLC — the question is whether the S-Corp election is in place and whether the reasonable salary is optimized. The S-Corp election under §1361–§1362 allows the orthodontist to split practice income between W-2 salary (subject to FICA) and S-Corp distributions (not subject to FICA).
For an orthodontist with $400,000 in net practice income, the reasonable salary benchmark (based on employed orthodontist compensation surveys) is typically $180,000–$240,000. With a $200,000 salary, the FICA savings on the remaining $200,000 in distributions is approximately $11,600 annually. The savings increase as income grows — at $500,000 net income with a $200,000 salary, the savings on $300,000 in distributions is approximately $17,400.
S-Corp Reasonable Salary Benchmarks — Orthodontist 2026
| Practice Net Income | Reasonable Salary Range | Annual FICA Savings |
|---|---|---|
| $300,000 | $160,000–$200,000 | ~$8,700–$11,600 |
| $400,000 | $180,000–$220,000 | ~$11,600–$13,900 |
| $500,000 | $200,000–$250,000 | ~$14,500–$17,400 |
Source salary benchmarks from AAO (American Association of Orthodontists) compensation surveys or MGMA dental specialist data. Document annually.
Retirement Plan Strategy for Orthodontist Practice Owners
The retirement plan strategy for orthodontist practice owners must account for employees. Unlike a solo practitioner with no staff, the orthodontist's S-Corp typically employs dental assistants, office managers, and treatment coordinators — all of whom must be covered by any qualified retirement plan established for the practice.
The most common approach is a 401(k) Safe Harbor plan with employer matching. The Safe Harbor match (typically 3–4% of compensation for all eligible employees) satisfies the nondiscrimination testing requirements and allows the orthodontist to maximize their own employee deferral ($24,500 or $30,500 with catch-up) without restriction. The employer match for employees is a deductible business expense.
For orthodontists with $300,000+ in net income who want to maximize pre-tax contributions beyond the 401(k) limit, a cash balance defined benefit plan can be layered on top. The cash balance plan must also cover eligible employees, which increases the cost — but the orthodontist's contribution (based on age and actuarial assumptions) is typically 5–10x the employee contributions, making the plan highly favorable for the owner.
Retirement Plan Stack: 48-Year-Old Orthodontist, $400,000 Net Income, 8 Employees
| Component | Owner Contribution | Employee Cost | Tax Savings (37%) |
|---|---|---|---|
| Safe Harbor 401(k) — employee deferral | $24,500 | — | $9,065 |
| Safe Harbor match (3% of all W-2) | $6,000 (owner) | ~$18,000 (8 employees) | $8,880 (all deductible) |
| Cash Balance Plan (owner, age 48) | $140,000 | ~$15,000 (8 employees) | $57,350 (owner portion) |
| Backdoor Roth IRA | $7,500 | — | $0 (tax-free growth) |
Practice-Specific Deductions: Equipment, Vehicles, and Home Office
Orthodontist practices are equipment-intensive — digital scanners (iTero, 3Shape), CBCT imaging systems, bracket systems, and practice management software all qualify for immediate expensing under §179 or 100% bonus depreciation under §168(k) (restored to 100% by the One Big Beautiful Bill Act for 2026). A new iTero scanner costing $35,000 can be fully deducted in the year of purchase rather than depreciated over 5–7 years.
The vehicle deduction is available for orthodontists who use a vehicle for business purposes — driving between practice locations, attending CE courses, or making bank deposits. The standard mileage rate for 2026 is $0.70/mile. For a vehicle used 80% for business, the actual expense method (depreciation, fuel, insurance, maintenance) may produce a larger deduction than the standard mileage rate. Practitioners should run both calculations in the first year the vehicle is placed in service to determine which method is more favorable — the choice in year one locks in the method for that vehicle.
The home office deduction under §280A is available for orthodontists who use a dedicated space in their home exclusively and regularly for administrative work — reviewing patient records, billing, insurance correspondence. The space must be used exclusively for business; a home office that doubles as a guest bedroom does not qualify. The deduction can be calculated using the simplified method ($5/sq ft, max 300 sq ft = $1,500) or the actual expense method (prorated share of mortgage interest, utilities, insurance, depreciation).
Frequently Asked Questions
Yes — dentistry, including orthodontics, is an SSTB under §199A(d)(1)(A) as the performance of services in the field of health. The QBI deduction phases out for orthodontists with taxable income above $394,600 (MFJ) in 2026 and is completely eliminated above $494,600 (MFJ). Retirement plan contributions are the primary tool for reducing taxable income below the phase-out threshold. An orthodontist with $400,000 in taxable income who contributes $170,000 to a 401(k) and cash balance plan reduces taxable income to $230,000 — potentially eligible for a partial QBI deduction.
Generally yes, if the orthodontist is 45+ and has $300,000+ in net income. The cash balance plan must cover eligible employees, which adds cost — but the orthodontist's contribution is typically 5–10x the employee contributions at older ages. The key is to structure the plan so the orthodontist's contribution is maximized relative to the employee cost. An actuary experienced with dental practices can model the optimal contribution structure. The plan requires a three-year minimum commitment and annual actuarial certification.
Yes — dental equipment including digital scanners (iTero, 3Shape), CBCT imaging systems, and practice management software qualifies for immediate expensing under §179 (up to $2,560,000 in 2026) or 100% bonus depreciation under §168(k) (restored to 100% by the OBBB for 2026). A $35,000 iTero scanner purchased and placed in service in 2026 can be fully deducted in the year of purchase. The deduction is limited to the net income of the practice — it cannot create a loss for S-Corp shareholders beyond their basis.
The reasonable salary must reflect what an employed orthodontist would earn performing the same services. The AAO (American Association of Orthodontists) publishes annual compensation surveys, and MGMA provides dental specialist data. Employed orthodontist compensation typically ranges from $200,000–$350,000 depending on geography and practice type. For S-Corp planning, practitioners typically set the salary at the lower end of the reasonable range — but the salary must be genuinely defensible. Document the determination with survey data in the client file each year.
Practice sale proceeds are typically allocated between personal goodwill (taxed at long-term capital gains rates), covenant not to compete (ordinary income), equipment (§1245 recapture at ordinary rates), and real property (§1250 recapture at 25%). The allocation in the purchase agreement governs the tax treatment. Practitioners should negotiate to maximize the personal goodwill allocation, which receives capital gains treatment. If the practice is held in an S-Corp, the sale can be structured as an asset sale (preferred by buyers) or a stock sale (preferred by sellers for capital gains treatment). The §338(h)(10) election allows a stock sale to be treated as an asset sale for tax purposes.
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Learn How to Implement ThisThe information on this page is intended for licensed tax professionals (CPAs, EAs, and tax attorneys) and is provided for educational and research purposes only. Tax law is complex and fact-specific — all strategies discussed are subject to limitations, phase-outs, and conditions that may not apply to every client situation. Practitioners should independently verify all information against current IRS guidance, Treasury Regulations, and applicable state law before advising clients. This content does not constitute legal or tax advice.
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