New Tax Law: How Does it Impact Dentistry?

By Helen Jameson, J.D.

The Tax Cut and Jobs Act that was signed into law in December 2017 and went into effect January 1, 2018, is the first major revision of the tax code in many years. Here are a few early observations about the possible impact on AAE members. However, keep in mind that the long-term impact on the economy will be seen over time.

Direct Impact

For AAE members, the primary benefit of the law is that it reduces the personal income tax rate for owners of “pass-through” entities such as partnerships and sole proprietorships. Most dental practices are organized as pass-through entities. Under the new law, owners of pass through entities will receive a 20-percent deduction on their taxable income, dropping their maximum tax rate from 39.6 percent to 29.6 percent.

However, as with all things tax related, it is more complicated. Practice owners will only qualify for the deduction if they earn no more than $415,000 a year for a married couple filing jointly or $207,000 for a single filer. If earnings exceed those amounts, there may be other ways to quality for tax breaks. Regardless, 2018 is a good year to spend a little more time with your accountant!

Indirect Impact

The bigger question is whether TCJA will impact the demand for dental services. Research by the ADA’s Health Policy Institute found that cost is the top barrier to seeking dental care, regardless of income, age and source of dental benefits. Dental care also has the highest cost barriers compared with other health services. We don’t know why, but it is a reality.

In 2015 just 36 percent of adults had visited a dentist in the prior 12 months. If the TCJA puts money into consumer pockets, that could have a positive impact on demand for dental services, starting with basic preventive visits. Another confounding factor is whether there are reversals Medicaid expansion under the Affordable Care Act.  The expansions have increased access to dental care to 5.4 million low-income adults.

Because state Medicaid programs cover few, if any, endodontic procedures, the impact on endodontists is negligible. However, reversal of those gains will impact general dentists, which can have a ripple effect in terms of referral practices. The AAE has joined the ADA and the Organized Dentistry Coalition in advocating that any gains in coverage under the ACA not be reversed.

2018 Midterms May Put Another Dentist in Congress

AAE’s representative to the ADPAC Board Dr. Susan L. Wood, reports that Dr. Jeff Van Drew, a practicing dentist and state senator, is running in the Democratic primary for an open seat in New Jersey’s Second Congressional District. Dr. Van Drew is favored to win the primary but will face a contentious race in the general election. ADPAC has contributed the maximum allowed amount to Dr. Van Drew’s campaign. If Dr. Van Drew wins in November, there will be five dentists serving in Congress.

Helen Jameson is the AAE’s assistant executive director for professional affairs. She can be reached at 800-872-3636, ext. 3048 or hjameson@aae.org.