How a Private Dental Owner Saved Over $40K Annually With Coordinated Practice and Real Estate Planning

The Challenge

The owner moved from a leased office into a $1.7M, 12-op building financed at about 5.3 percent for 15 years, which created new tax levers across the practice and a real estate LLC. He needed a defensible rent strategy that turns ownership into reliable tax efficiency while keeping the practice’s margins attractive for lenders and future partners.

At the same time, missed deductions and timing issues were leaking value. Charitable gifts were not consistently documented. The Augusta rule needed a compliant process. Quarterly estimates required a rebuild to avoid penalties. With a spouse earning about $190K to $200K, household planning had to sync with benefits and withholding. A clean accounting transition and follow-up on local tax items were necessary to make the new structure easy to run and audit.

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Gelt’s Strategic Approach

Here is how we aligned structure, cash flow, and documentation to turn the building into a tax asset.

1. Rent Calibration Between Entities
   Modeled market-based rent ranges and safe harbors so the real estate LLC absorbs paper losses while practice metrics remain attractive.
2. Cost Segregation Readiness
   Assessed the 2024 acquisition for a study that accelerates depreciation on eligible components, coordinated placed-in-service timing, and mapped passive activity usage.
3. Grouping Election Analysis
   Explored grouping the practice with the real estate to align income and deductions and reduce passive loss friction.
4. Quarterly Estimates and Cash Flow
   Rebuilt 2024 and forward estimates to limit underpayment risk and tied payments to production and rent cadence.
5. Itemization and Charitable Support
   Delivered a donations playbook for temple gifts and non-cash items with valuation and substantiation steps to secure itemized deductions.
6. Augusta Rule Procedures
   Implemented a compliant home-rental framework for practice meetings, targeting about $14K per year of tax-free income with minutes and fair-market support.
7. Spousal Plan Integration
   Reviewed potential deferred compensation options and coordinated withholding to optimize the household bracket.
8. Accounting Transition and Local Compliance
   Moved bookkeeping to Gelt for clean intercompany tracking and followed up on local tax items tied to the prior location.

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Results & Implementation Roadmap

Early Wins

• Set a market-supported rent so real estate losses offset practice income without eroding practice margins
• Activated Augusta rule calendar and documentation
• Launched donations documentation to capture itemized deductions that were previously missed

Projected Impact

• Depreciation acceleration: Targeting six-figure first-year deductions if the cost segregation study is finalized
• Annual tax savings: Over $40K from coordinated rent, Augusta rule, itemization, and better estimate planning
• Penalty avoidance: Updated quarterly estimates reduce underpayment risk and stabilize cash flow

Next 90 Days

1. Complete cost segregation analysis and implement depreciation schedules
2. Finalize grouping election decision and file statements if elected
3. Lock in rent memo support and automate intercompany entries
4. Decide on spouse deferred comp and rebalance withholding
5. Close accounting transition and confirm local tax filings

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Conclusion

Owning the building turned a monthly mortgage into a planning engine. With rent, elections, and documentation aligned, the practice now keeps more after tax while preserving clean financials for lenders and future partners. The structure is simple to run, easy to audit, and built for growth.

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