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Don’t Let Dental School Loans Get You Down

Graduating from dental school is a big deal – one you should be very proud of. Unfortunately, your obligation to repay your student loans can cut your celebrations short. Happily, there are programs available to help graduates elevate or ease the pain of having to pay back those loans.

In 2014, the Ohio General Assembly passed a law that effectively provides loan repayment for dentists and dental hygienists who practice in underserved areas of Ohio.

Who Qualifies For Relief?

If you meet one of the following criteria, you most likely qualify for the loan repayment program.

  • Dental students, and dental hygiene students, who are in their final year of school.
  • Dental residents in their first year of residency or are currently enrolled in an advanced education program.
  • Practicing general and pediatric dentist or dental hygienist.

Remember: you must be working full-time (40 hours per week) or part-time (20-39 hours per week) in underserved areas of the state serving Medicaid-eligible patients and those who are unable to pay.

Want to learn more about the practice sites that qualify for loan repayment program or want to complete the application for the loan repayment program application and other forms. The Ohio Department of Health (ODH) can help. You can also check out this loan repayment programs fact sheet for more details.

However, if you are looking for more help managing your finances in general, the bright dental team at Rea & Associates is at your service! Contact us today for more dental school tips.

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Dentists Want More From Vacation Homes

Second Houses Can Trigger Tax Relief

Second Houses Can Trigger Tax Relief for Dentists - Bright Dental CPAs - Ohio Accounting Firm

If you rent your vacation home to friends and family at a cost that’s less than what is considered to be a fair rental price during the weeks you are not using it, it’s considered personal use property, which allows you to deduct real estate taxes and mortgage interest as itemized deductions on your personal tax return.

There will come a point in your dental career when you will have finally paid off your student loans, updated your equipment, remodeled your practice and have secured a large, dependable customer base. This will be a pinnacle moment in your life and certainly cause for celebration. Oftentimes, dental professionals choose to celebrate such an accomplishment by making a large purchase – a tangible representation of their professional success. For many, a second home not only becomes a symbol of their achievement, it can be a useful (and potentially lucrative) investment that can bring added tax benefits.

Read Also: Debunking Common Personal Finance Myths For Dentists

I frequently field questions from clients who want to know more about their tax implications with regard to purchasing a vacation home. Below are some common scenarios to consider, based on the insight I have provided to dental professionals in the past.

Change The Scenery

If you rent your home 14 days out of the year or less and use the home for personal use for 14 days or more, the property will be classified as personal use property, which allows you to deduct your real estate taxes and mortgage interest as itemized deductions on your personal tax return. In addition, if you rent your home out to your dental practice for meeting space a few times a year (fewer than 14 days), your practices can take a deduction for the expense of renting the property. Just make sure that the business purpose of the space is clearly defined.

Generate Extra Income

Rather than buy a vacation home that sits empty for the majority of the year, you may find that it makes sense to rent it out to others while you aren’t using it. If you do decide to go this route and rent it for more than 14 days of every year, remember that all income generated as a result of this transaction is taxable. That being said, a portion of the mortgage interest and real estate taxes may be deductible as rental expenses while some of your other expenses could qualify as itemized deductions. You might be able to take depreciation on the property as well. Furthermore, rental losses are limited based on your adjusted gross income and are carried forward during the years in which the loss cannot be taken. This whole process can get confusing. Therefore it’s important to sit down with your tax advisor to ensure that Uncle Sam gets his cut.

Welcome Friends

So you aren’t really on board with the prospect of renting your vacation home to strangers while you are away, but you really don’t like the idea of letting the house sit empty either. In this case, you might consider renting the property to friends and family. If you take this route and rent it at a cost that’s less than what is considered to be a fair rental price during the weeks you are not using it, it’s considered personal use property, which once again allows you to deduct real estate taxes and mortgage interest as itemized deductions on your personal tax return.

Four Interesting Facts To Know Before You Buy

If you are struggling to figure out which state you should consider as the location of your second home or whether investing in a piece of land, timeshare or even a mobile home is more favorable to your specific situation, consider these interesting tax facts.

  1. If you decide to invest in a portion of land on which to build your home then, for whatever reason, change your mind and decide to sell the property prior to personal use, the gains or losses would receive capital gain or loss treatment. On the other hand, if you buy the land, build a home, and, after a while, decide to sell it at a loss after having used it personally, you will not be able to claim the loss on your tax return.
  2. Ever wonder if that boat, mobile home or house trailer qualifies as a second residence for purposes of the mortgage interest deduction? Good news – it does! That is, it qualifies for the deduction as long as it includes sleeping, cooking and bathroom facilities.
  3. Looking to purchase a vacation home far from the obligation of state income taxes? Then look no further than Florida, Texas, Alaska, Nevada, South Dakota, Washington, Wyoming, New Hampshire or Tennessee. These states don’t have a state income tax, which could lower the tax impact on your rental income and any gains realized from the sale of a piece of property.
  4. Listening to a salesman pitch the benefits of owning a timeshare can be terrifying, but taking the plunge and making the investment doesn’t have to be – at least from a tax standpoint. Timeshares can be considered second homes for the purpose of deducting interest expenses. However, if you decide to rent the timeshare to a third party, you may end up forfeiting the mortgage interest deduction. Another common misconception about timeshares is that letting a charitable organization stay there for a period of time will qualify as a charitable contribution. This is not the case. The only way to get a charitable deduction for your time share is to donate the entire property to a charity.

Want to find out if owning a vacation home is right for you? Email the Bright Dental CPAs at Rea & Associates today.

By Dan Bialek, CPA (Mentor office)

Want to master the various stages of your dental career?
These article may provide some insight.

What To Expect From Your Career In Dentistry
Factors In Determining Dentist Compensation
What To Consider When Purchasing A Dental Practice

Your Practice’s Free Valuation Could Come At A Hefty Price

Dental Practice Valuations

It has become a popular business model for some companies to contact prospective or existing business clients to offer them a free business valuation report. But what the sales rep won’t tell you is just how expensive these free services can be. In the end, you are just throwing your hard-earned money down the drain.

Owning a dental practice is just as mentally taxing as maintaining any other economically viable business. It’s no wonder you often daydream about innovative ways to cut office expenses and jot down ideas to generate revenue on napkins over dinner. At some point you will come to terms with the fact that, in addition to helping people, your ultimate business goal is to increase your practice’s overall value while making sure you can save enough for your own retirement.

What would you do if someone approached you about conducting a free business valuation on your dental practice? The easy answer is to say “yes,” right? After all, you are probably well aware of how important a business valuation is to the success of your practice – not to mention your own financial future. So, naturally, it doesn’t make sense to turn down this free offer … or does it?

Read Also: What To Expect From Your Career In Dentistry

Is ‘Free’ Worth It?

It has become a popular business model for some companies to contact prospective or existing business clients to offer them a free business valuation report. But what the sales rep won’t tell you is just how expensive these free services can be.

I recently met with an insurance representative who mentioned that he provides clients with free business valuations. This particular company had CPAs and valuation professionals on staff and would prepare these valuations with just the answers they collected from a five-minute questionnaire and three years’ worth of their financial data. Within a few days, their client would (supposedly) have a clear picture of what their business was worth.

After hearing about their method, I had even more questions. After all, having conducted thousands of business valuations myself, I knew something didn’t quite add up. So I asked to have a look at the valuation report this company typically presented to their clients and, within minutes of reviewing the document, the company’s motive became crystal clear.

Not only was this sales rep giving clients inaccurate information, he was grooming them to purchase more insurance than they actually needed. A transaction that would have resulted in you paying much more than you could have anticipated. On the other hand, when you work with a business valuation expert your practice actually stands to make significant gains.

When you hire a business valuation expert, you are hiring a professional who will take the time and energy to really get to know you, your dental practice and its prospects for the future.

Not Free, But Priceless

Email the Bright Dental Team to find out how our business valuation experts can help you grow and better manage your dental practice. The benefits of a Know & Grow Valuation include general business planning, succession planning and financial planning, buy-sell agreement values, exit planning strategies, and more.

By Tim McDaniel, CPA/ABV, ASA, CBA (Dublin office)

 

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What To Expect From Your Career In Dentistry

Dental Career Planning - Dental CPA

Your school debt is almost paid, your practice is busy and, for all intents and purposes, successful, and you are now at a point in your career where you are beginning to build equity in your practice. This is truly a great moment for you as a professional and as a dental practitioner. But be forewarned. At this point in your career, you are likely making some serious money – which means you are probably itching to spend a little (or a lot) of it. This is the fork in the road that will determine much of your future happiness.

Owning a dental practice can be very rewarding as long as you remember that you’re entering an endurance race – not a sprint. So, if you’re looking for a “get rich quick” scenario, opening a dental practice is probably not for you. If you want a fulfilling career that, albeit challenging, can be incredibly fulfilling, read on.

Getting to know the four stages of a typical dental career will help you measure your own success and will help motivate you to make the best choices for your practice, especially during the first few years. And don’t forget to download The Business Side of Dentistry: Tips and Tools for Dentists for more insight into the dental profession.

The Dental Practice Career Cycle

  1. Slow And Steady Wins The Race

Owning a dental practice is just like owning any other small business. You must be mindful of all your new entrepreneurial responsibilities. Managing employees, establishing internal controls, negotiating with vendors and even generating a marketing plan are essential to running a productive and successful business. Unlike your friends who opted to pursue MBAs, your background in these disciplines is limited. It’s also likely that you will find yourself at an economic disadvantage because, unlike your business school cohorts, you have astronomical debt.

Read: Dentistry: It’s Not All White Coats and Drills

The American Student Dental Association states that, according to the American Dental Education Association, the average dental student graduates with upwards of $241,000 of student loan debt. This total has not only increased more than 66 percent in the last decade, it greatly exceeds the average student loan debt nationwide. Therefore, as nice as it would be to spend your paycheck on luxury items, avoid the temptation. Your long-term success will be measured by how well and how quickly you can pay down your debt. Get started as soon as possible. It will be worth it.

  1. Build A Solid Foundation With A Sound Financial Plan

Your school debt is almost paid, your practice is busy and, for all intents and purposes, successful, and you are now at a point in your career where you are beginning to build equity in your practice. This is truly a great moment for you as a professional and as a dental practitioner. But be forewarned. At this point in your career, you are likely making some serious money – which means you are probably itching to spend a little (or a lot) of it. This is the fork in the road that will determine much of your future happiness.

You can either choose to spend it on vacations, homes, cars and the like, or you can start developing saving habits that will set you up for later in life. Frankly, this is an optimal time to develop a financial plan and start putting a set amount of money into a retirement instrument every month. Whether it’s a stock portfolio or a 401(k), developing a steady financial plan is critical. That’s not to say that you can’t buy some really nice things along the way – just make sure you have a nice nest egg waiting for you when you are ready to start your retirement.

  1. Put The Pedal To The Metal

There comes a time, usually in your early to mid-50s, when the kids are through school, your business and student loans are paid off, you are paying for equipment upgrades from your cash flow and your financial plan is beginning to bear fruit. This is the point on your career timeline where you set your sights on what you want out of retirement and revise your plan to make sure it happens.

There are things to consider at this point in your life and there are tools to help you make informed decisions. At this stage, many dentists find themselves yearning for more control over their free time and less pressure at work. They aren’t yet ready to retire, but would love to slow down and smell some of the roses they’ve planted. Working with a business valuation or succession planning professional can help you streamline your future goals while ensuring that there will be no major surprises along the way.

  1. You’ve Worked Hard, It’s Now Time To Play Hard

It’s been a long, exciting road – but you wouldn’t have had it any other way. As we round the corner to stage four of your career as a dental practice owner, you can finally sit back and relax. If you took the time to plan ahead, your mind, body, spirit and bank account are ready. Now the only thing left to do is to pass the torch to a good, young dentist and take your leave. You’ve earned it.

Have questions? Email the Bright Dental CPAs at Rea & Associates for answers. And don’t forget to download your free copy of The Business Side of Dentistry: Tips and Tools for Dentists and get to know more about what you will encounter as a new dental practice owner.

By Ryan Dumermuth, CPA, CFP (Mentor office)

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ID Thieves Don’t Discriminate, Health Professionals Are At Risk

ID Theft and Refund Fraud - Dental CPA

Health professionals are at risk of identification theft and refund fraud. This compilation of resources offered in this Rea & Associates resource will help you through the next steps to reclaiming your identity if you have been targeted.

What has become abundantly clear over the last several years is that it doesn’t matter who you are, where you live or how you make a living – identity thieves do not discriminate. While tax refund fraud has been around since 2008, the size and scope of the scam has ballooned since then. Fast forward to 2013, and we find that the rapid escalation of this particular scam claimed a jaw-dropping $5.2 billion, according to the United States Government Accountability Office.

Locally, business owners continue to steadily report instances of identity theft and tax refund fraud to local law enforcement as well as to their financial advisors. From our perspective, we continue to see more instances of refund fraud than in previous years, particularly among healthcare professionals, which is a trend that is only expected to get worse.

Read: How To Recover From Identity Theft & Refund Fraud

Is It Too Late For You?

You probably won’t even know that you’ve been a victim of tax refund fraud until it’s too late. Some taxpayers will learn about the breach after receiving a letter from the IRS or from their state’s taxation department. It’s also likely that your accountant will be the first one to make the discovery when they try to file your tax return and receive a notification that the name and Social Security Number of their client – you – has already been used.

Here’s where it gets tricky.

Once it’s been discovered that you have been victimized, the burden is on you to prove your identity to the IRS to obtain the tax refund that is rightfully yours. The good news is that once you are able to prove that you are who you say you are, the IRS will happily release your money. But the bad news is that the entire process can take a lot of time and can be confusing to navigate.

Rea & Associates recently released a compilation of documents and resources from a variety of sources to help victims recover from Identity Theft & Refund Fraud, which can be an overwhelming task in itself. The steps victims must complete include:

  • Filing a report with the local police
  • Filing a complaint with the Federal Trade Commission
  • Contact one of the three major credit bureaus to place a “fraud alert on your credit records.
  • Respond immediately to any IRS notice by calling the number provided
  • Complete the Identity Theft Affidavit

You don’t have to go through it alone. Your financial advisor can help you through the steps and can communicate with the IRS on your behalf. Your advisor can also determine the validity of documents and phone calls if you have further concerns.

IRS Calling? Don’t Buy It

In addition to stealing your federal and state tax returns, some scammers are going the extra mile to harass their victims to pay “back taxes” that they don’t actually owe. It’s important to remember that the IRS will never contact you by phone or in person. The first correspondence you will have with the IRS will always be in the form of a letter – not a phone call. Last year, more than 1,000 taxpayers collectively lost about $5 million after scammers called to demand payment to settle their debt with the IRS. Failure to pay, the scammers warned, would result in jail time and driver’s license revocation.

For additional guidance, click here to read How to Recover from Identity Theft & Refund Fraud: A Compilation of Documents and Resources and get access to valuable information about what you should watch out for and how you can recover. For more information or for help claiming your tax return, email the Bright Dental CPAs at Rea & Associates.

By Alan Hill, CPA (Mentor office)

 

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Rea & Associates, Inc. | Bright Dental CPAs | 7201 Center St, Mentor, Ohio 44060-4858
phone + 440-266-0077