Should Dentist Reduce Hours to Save Taxes?

Just looking for confirmation that I am thinking right here… I have a couple associates that work for me out of 2 offices, and I work 5 days a week. 2010 Tax bracket made over the 33% bracket and will likely increase this year. Associates make 30%. I am thinking cutting back a day and let an associate work it. This way I would be substituting an income tax payment over the 212k threshold at 33% for a before tax payment to the associate at 30%. This is assuming production stays the same. In other words, if production for that day/ month is $10,000, and all the overhead is covered, then this is straight profit over the threshold. I could pay the associate 3000 and take the day off, or work the day and pay Uncle Sam 33%, and still take home about the same disposable income. Am I right in this thinking? Anything else that I am not thinking about?

Let’s do the math on your example:

$10,000 x 33% in tax = $3,300 so you net $6,700 to spend after tax, or

$10,000 x 30% to assoc = $3,000, $7,000 x 33% = 2,310, so you net $4,690 to spend after tax.

So those 8 hours cost you $2,010. Does that work for you?

Trying to keep it simple, you could get into a lot of details…let’s just assume the 30% covers Compensation + Expenses of associate.

This first appeared on Dentaltown.

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