Each year, the IRS adjusts tax thresholds to account for inflation. For 2026, several changes will impact how dental practice owners plan their finances and manage their tax liability.
Income Tax Brackets Expand
Tax rates remain unchanged for 2026, but the income thresholds are shifting upward. Lower brackets will increase by roughly $475–$950 depending on your filing status, while higher brackets expand by as much as $17,000.
What this means: If your income has stayed relatively flat, you’ll likely see a modest reduction in your effective tax rate as more income falls into lower brackets. For practice owners drawing both salary and distributions, this creates additional planning flexibility.
Standard Deduction Increases
The standard deduction continues its inflation-indexed climb:
- Married filing jointly: $32,200
- Head of household: $24,150
- Single or married filing separately: $16,100
For dentists who prefer simplicity over itemizing, these increases provide straightforward tax relief without added paperwork.
Capital Gains Thresholds Rise
Long-term capital gains rates hold steady at 0%, 15%, and 20%, but the income thresholds for each bracket are moving up. This adjustment creates opportunities for tax-efficient asset sales.
If you’re holding investments outside your practice—real estate, brokerage accounts, or considering a transition strategy—you may be able to realize more gains before hitting the next tax tier. Timing matters, especially for dentists approaching retirement or restructuring their investment portfolio.
Family Credits Stay Mostly Flat
The Child Tax Credit remains at $2,200 per qualifying child, with up to $1,700 refundable. Phaseout thresholds are unchanged at $200,000 for single filers and $400,000 for married couples.
The adoption credit sees a small bump to $17,670, with $5,120 refundable—a helpful adjustment for families expanding through adoption.
Estate Planning Window Remains Open
The unified gift and estate tax exemption will permanently increase to $15 million per individual, indexed for inflation going forward. The annual gift exclusion holds at $19,000 per recipient.
For practice owners considering succession planning or wealth transfer strategies, these historically high exemption levels remain a significant opportunity. Whether you’re transitioning ownership to a family member or structuring a buyout, now is the time to explore your options.
What You Should Do Now
These adjustments offer meaningful—if modest—tax relief for most dental professionals. Here’s how to take advantage:
- Review your 2026 income projections and adjust estimated tax payments based on the new brackets
- Reevaluate your S-corp compensation mix to ensure salary and distributions remain tax-efficient
- Time capital gains strategically if you’re planning to sell investments or practice assets
- Update your estate plan while exemption levels remain favorable
The changes may seem incremental, but proactive planning ensures they work in your favor rather than slipping by unnoticed.
Need help navigating the 2026 adjustments? Our team at DentalCPA specializes in translating tax updates into clear, actionable strategies for dental professionals. Contact us to discuss how these changes impact you.