For Physicians & Dentists · best tax investments for dentists and surgeons
By Yuri Rutman, Writer/Director & Producer, The Violinist (Filmdemand). Educational content only — not investment advice.
This article is educational, not individualized tax advice. Consult a CPA familiar with dental and surgical practice structures before implementing any strategy described here.
The best tax investments for dentists and surgeons who own their practices start before the investment conversation. Practice ownership unlocks structural tools that are simply not available to W-2 employees, regardless of income level.
Practice-level tools
The practice itself is the first tax-planning tool
Before looking at any investment, confirm the practice's entity structure — an S-corp in many cases — is optimized, since this meaningfully affects self-employment tax exposure. A CPA experienced specifically with dental or surgical practices, not a generalist, is worth the marginal cost given how practice-specific the relevant deductions and structuring decisions are.
Defined benefit and cash balance plans: the biggest single lever
For practice owners in peak earning years, especially those starting a plan later in their career, defined benefit and cash balance plans can allow contributions dramatically larger than a standard 401(k) limit — sometimes several times larger, depending on age and income. This is frequently the single highest-impact tool available, and it is underused simply because it requires more setup than a standard retirement plan.
Practice real estate and cost segregation
Many dentists and surgeons own their practice's real estate, personally or through a separate entity that leases back to the practice. That creates an opportunity for cost segregation studies — reclassifying components of the building into shorter depreciation schedules — which can generate substantial near-term deductions, particularly valuable in a high-income year or after a buildout or renovation.
Equipment depreciation
Dental and surgical equipment is often eligible for accelerated depreciation under Section 179 and bonus depreciation rules, subject to current limits and phase-outs, making the timing of major equipment purchases a real tax-planning lever rather than only an operational decision.
Investment-level tools
Once practice-level tools are optimized, the same principles apply as for any high earner: asset location between taxable and tax-advantaged accounts, municipal bonds for the taxable fixed-income allocation, and QOZ investment for any significant capital gain, including gains from a future practice sale. For those further along in building an alternative allocation, private placements — real estate, energy, or media and film financing among them — sometimes carry their own tax characteristics, but any specific tax claim needs its own written tax opinion, reviewed independently, rather than being assumed from general statements about the asset class.
A note on practice sale planning
For dentists and surgeons approaching a practice sale — increasingly common given consolidation in both fields — tax planning should start well before the transaction, not at closing. QSBS eligibility, installment sale structuring, and QOZ reinvestment of the resulting gain all require lead time, and retroactive planning after closing leaves significant value on the table.
A practical checklist
1. Confirm entity structure is optimized for the practice's current income level.
2. Evaluate defined benefit or cash balance plan feasibility — often the highest-impact lever available.
3. Assess cost segregation opportunity on practice real estate, especially after renovation or new construction.
4. Time major equipment purchases with Section 179 and bonus depreciation rules in mind.
5. Optimize asset location and consider municipal bonds for the taxable portfolio.
6. If a practice sale is on the horizon, begin planning years, not months, in advance.
7. For any private placement considered for its tax characteristics, confirm with a written, deal-specific opinion.
The bottom line
Dentists and surgeons who own their practices have access to some of the most powerful tax-planning tools available to any high earner, led by defined benefit and cash balance plans and practice real estate depreciation. These structural tools should be fully optimized before layering in investment-level tactics or private placements with their own deal-specific tax characteristics.
Frequently asked questions
What is the highest-impact tax tool for a practice owner?
Usually a defined benefit or cash balance plan, which can permit contributions several times a standard 401(k) limit depending on age and income.
Is cost segregation worth it for a small practice building?
It depends on the building's basis and the owner's income in that year. It is most valuable following renovation or acquisition in a high-income year.
How early should practice sale tax planning begin?
Years before a transaction. Structuring options narrow considerably once a sale is underway or closed.
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Educational information only. Not investment, legal, or tax advice, and not an offer to sell or a solicitation to buy any security. Any offering is made only to verified accredited investors through definitive offering documents. Film investing involves substantial risk, including total loss of capital. Statements about Section 168(k) reflect current law; statements about a federal 20% production credit refer to pending legislation that has not been enacted. Consult your own advisors.