How Texas Dentists Can Reduce Tax Liability When Expanding, Hiring, or Investing in New Technology

Growing a dental practice, whether through hiring, renovating, or adopting new technology, is a valuable opportunity to reduce tax liability. In Texas, practices have unique advantages, particularly no state income tax, multiple state-level exemptions, and generous federal incentives that reward equipment purchases, office buildouts, workforce expansion, and innovation. With the proper planning, Texas dentists can unlock sustainable financial benefits, potentially saving tens of thousands of dollars during growth phases. 

This guide walks through the most impactful federal and Texas-specific opportunities available to dental practice owners in 2026. 

Key Takeaways:  

• Texas dentists can leverage unique state advantages, such as no state income tax and Texas-specific exemptions, alongside federal incentives when expanding their practices, hiring staff, or investing in technology.
• Utilizing tax planning strategies can lead to significant financial benefits, including immediate expensing of equipment through Section 179 and Bonus Depreciation, tax credits for R&D, and sales tax exemptions for medical equipment.
• Proper documentation and planning are crucial to optimizing tax benefits and avoiding common tax mistakes during practice growth. 

Why Tax Planning Matters During Practice Growth 

Growth triggers several tax-favored events-purchasing equipment, adding operatories, hiring staff, and upgrading digital workflows. Since Texas does not impose a personal income tax, dentists keep more of their earnings, but federal planning becomes even more essential.  

Proactive tax planning enables: 

• Large equipment purchases are structured for maximum immediate expensing 
• Proper classification of new hires and related expenses 
• Technology investments are evaluated for federal R&D credit eligibility 

Federal & Texas-Specific Tax Incentives for Practice Expansion 

Section 179 & Bonus Depreciation for Dental Equipment 

Under IRC §179, dental practices can immediately deduct the cost of qualifying business equipment placed into service during the year, items such as: 

• CBCT and panoramic units 
• Intraoral scanners 
• CAD/CAM milling units 
• IT infrastructure 
• Operatory and sterilization equipment 

The recently signed OBBBA, bonus depreciation (IRC §168(k)), allows an immediate 100% expense for eligible equipment purchased after 1/19/2025. For example, a Texas dentist who invests $ 150,000 in new technology may deduct most or all of that cost in the year of purchase. 

Texas Sales Tax Exemptions for Dental and Medical Use 

Texas tax rules exempt many dental-related purchases when the equipment is used to diagnose, treat, or prevent disease. This means many dental devices qualify as exempt medical items under Texas Tax Code §151 and related Comptroller rules. Common qualifying items include; 

• Diagnostic and treatment equipment 
• Certain medical devices 
• Some software is integrated with medical equipment 

Track Product Sales Separately 

Product sales are subject to charging, collecting, and remitting sales tax to the state’s filing requirements, and the remittance frequency depends on sales volume. Dentists must verify that vendors correctly classify equipment; misclassification often results in overpayment of Texas sales tax. When in doubt, dentists can issue a Texas Exemption Certificate (Form 01-339) to eligible vendors. 

The Federal R&D Tax Credit-Yes, Dentists Can Possibly Qualify 

Documentation is essential. Practices should keep notes, screenshots, clinical testing logs, workflow trial records, and any evidence showing experimentation and improvement. The Research & Experimentation Tax Credit (IRC §41) applies when a dental practice engages in identifiable activities such as: 

• Testing digital workflows 
• Developing new clinical techniques 
• Implementing or refining AI-driven processes 
• Optimizing patient flow or operational systems 

Incentives for Staff Training & Upskilling 

Training expenses, whether for CE, digital dentistry, or AI-assisted technology, are typically deductible as ordinary and necessary business expenses under IRC §162, including: 

• Continuing education courses 
• AI technology training 
• Clinical workshops 
• Software onboarding 

For practices adopting new digital systems, these deductions are frequently associated with large equipment purchases, which are eligible for accelerated depreciation under either §179 or §168(k) bonus depreciation. 

Real Estate & Build-Out Tax Planning for Dental Offices 

For practices that renovate or build new spaces, a cost segregation study reclassifies eligible components of the project into shorter-life property, accelerating depreciation and reducing taxes. These segregated components may also be eligible for §179 bonus depreciation. Let’s say there is an $800,000 build-out; it may generate substantial first-year depreciation and improve cash flow during the expansion. Items inside dental practices that often qualify: 

• Plumbing dedicated to dental chairs 
• Electrical dedicated to imaging units and equipment 
• Specialized cabinetry 
• Ventilation for sterilization areas 
• Technology and server rooms 

Leasehold Improvement Deductions 

Leasehold improvements may qualify for favorable depreciation treatment when properly documented. Without proper documentation and classification, dental practices can experience delays in deductions. Dentists commonly miss deductions for: 

• New lighting 
• Non-structural interior wall changes 
• Flooring 
• Operatory reconfiguration 
• Certain HVAC systems 

Common Tax Mistakes Texas Dentists Make During Expansion 

There are several common mistakes that Texas dentists might make when expanding their practices.  

• Purchasing equipment in the wrong entity (e.g., personally vs. practice entity). 
• Bundling multiple large technology purchases can complicate depreciation timing. 
• Poor documentation for new hire expenditures 
• Missing Texas enterprise incentives, like equipment exemptions 
• Failing to evaluate R&D credit eligibility for digital workflow improvement 

Going Forward: Action Plan for Texas Dentists 

Navigating expansion can be very challenging, but there are action steps that can help answer questions, streamline processes, and positively enhance the transition period. Below are guiding checklists to help dental practices purchase technology, increase staffing, and hire a CPA.  

Technology Purchase Checklist 

• Confirm Section 179 eligibility 
• Evaluate the bonus depreciation option 
• Verify the Texas sales tax exemption status and sales tax remittance on the sale of the product 
• Document installation, testing, and workflow improvements 
• Coordinate timing with CPA for optimal year-of-service placement 

Hiring Expansion Checklist 

• Licensure & RDA registration check 
• Collect applicable I-9 or W-4 forms 
• Provide a detailed job description and an updated employee handbook 
• Track training and onboarding expenses 

Key Questions to Ask a Dental-Focused CPA 

• "How should I structure these equipment purchases for maximum deduction?" 
• "Does my renovation qualify for a cost segregation study?" 
• "Should I evaluate R&D credit eligibility for my digital workflow changes?" 
• "Which Texas sales tax exemptions apply to my equipment orders?" 
• "Should I plan a mid-year tax projection before expanding?" 

Growth Starts Here  

Whether in technology, staff, or office space, growth is an ideal method to reduce tax liability. Texas dentists are uniquely positioned to leverage both federal and state-specific exemptions that significantly lower the cost of expansion. With proper planning, documentation, and CPA guidance, these strategies can save money while positioning them for long-term success. To optimize your 2026 equipment purchases, renovations, or hiring initiatives, contact our team below.