Most bookkeepers treat a dental practice like any other small business. They categorize income as revenue, track expenses, reconcile the bank account, and call it done. The problem is that dental practices have specific accounting requirements that a generalist bookkeeper simply does not know about, and those gaps show up in your tax bill.
HST and Dental Services: It Is Not Straightforward
Most dental services are HST exempt in Canada, which means you do not charge HST on basic dental procedures. However, not all services are exempt. Cosmetic procedures like teeth whitening are generally taxable. If your practice offers a mix of exempt and taxable services, your HST calculations become more complex and the Input Tax Credits you can claim are restricted.
Getting this wrong means either collecting HST you should not be collecting, or missing input tax credits you are entitled to. Both are costly mistakes.
Associate Dentist Payments
Many dental practices work with associate dentists, and how those payments are structured has significant tax implications. Is the associate an employee (T4) or a subcontractor (T4A)? The answer affects payroll taxes, HST obligations, and liability. CRA pays close attention to the associate dentist relationship, and misclassification is a common audit trigger.
If you have associates working in your practice, this classification needs to be done correctly from day one.
Dental Equipment and Capital Cost Allowance
Dental equipment is expensive. Chairs, x-ray machines, CBCT scanners, sterilization equipment, CAD/CAM systems. Each category of equipment falls into a specific CCA class that determines how quickly you can depreciate it for tax purposes. Categorizing equipment incorrectly means either claiming too little depreciation (paying more tax than necessary) or too much (triggering a recapture when you sell).
Your bookkeeper needs to know the CCA classes relevant to dental equipment and track them properly every year.
Lab Fees and Supply Costs
Dental labs, supplies, and materials need to be categorized separately and correctly. These are significant expenses for most practices, and proper categorization affects your financial statements, your tax return, and your ability to benchmark your practice against industry averages.
Professional Corporation Considerations
Most Ontario dentists practice through a Professional Corporation (Dentistry PC). These entities have specific CRA rules around income splitting with family members, the small business deduction, and passive investment income. The rules for a dentistry PC are not the same as for a general corporation, and your accountant needs to understand the distinction.
What This Means Practically
If your current bookkeeper or accountant does not have experience specifically with dental practices, there is a good chance you are leaving money on the table or carrying risk you do not know about. The stakes are high enough that it is worth working with someone who has seen your specific situation before.
We work with dental professionals across Ontario. Book a free 20-minute intro call to talk through your practice’s accounting situation.