The Next Big Thing for Dental Laboratories: A Tax Credit?

The year is 2020, and new more affordable technologies have made it possible for dental practices and labs to expand their capabilities to better serve their patients than ever before. Implementing these technologies and hiring the staff necessary to operate them of course comes at a cost. The federal government, however, has long rewarded companies that are innovating their businesses with powerful tax incentives and dental practices are now realizing they too can qualify.

With over 7,000 tax incentives in the tax code, it can be difficult for businesses to know what they qualify for and what they should be claiming. There is one underutilized incentive, in particular, that applies across industries that rewards companies, including dental laboratories, for the things they are doing every day to remain competitive and become more efficient.

It’s called the R&D Tax Credit but don’t let the name fool you. Many qualifying businesses miss out on the substantial tax savings the credit provides because they erroneously believe that they need to have an entire department dedicated to R&D creating never-before-seen technologies.

When the credit was first introduced in the 1980s to combat the threat to the American economy posed by the Japanese automotive industry that may have been true. But, four decades later the country has changed and the tax code along with it. Congress has since reprogrammed and repurposed the R&D credit to be an anti-outsourcing credit that benefit more industries for their daily activities as long as they are hiring technical jobs in the United States. That benefit extends to dental laboratories and many practices are just now realizing it.

The R&D Tax credit extends to dental laboratories, but what activities do they need to be doing to qualify? Labs that are creating custom solutions for patients are the most likely to qualify due to the equipment and work necessary to produce custom work. Below is just a small sampling of the types of activities that can qualify a lab for the credit:

• Digital scans and oral impressions
• Designing restorative & prosthetic materials and equipment
• Experimenting with different designs and materials for prosthetics and appliances
• Crafting crowns, bridges, dentures, specialty appliances, orthodontics and implants
• Processing digital data from scans
• In-house manufacturing
• CAD/CAM imaging and milling of custom oral prosthetics.

Labs and practices that perform the above activities or similar work are eligible for the credit. As long as the laboratory is employing technologies, like digital scanners, CAD/CAM software, or 3D printers to create custom solutions for patients, the practice may be eligible to qualify for significant tax savings.