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Dentists, Puns, and Money is a podcast focused on two things: The financial topics relevant to dentists leaving clinical practice and the stories and lessons of dentists who have already done so.
1. The stories of dentists who have transitioned from full-time clinical dentistry.
2. The financial topics that are relevant for dentists making that transition.
If you’re a dentist thinking about your exit from clinical, and you’d like to learn from the experiences of other dentists who have made that transition, be sure to subscribe to your favorite podcast app.
Host Shawn Terrell also dives deep into the many financial components of exiting dentistry, including tax reduction strategies and how to live off your assets.
And, we try to keep it light by mixing in a bad joke… or two.
Please note: Dentists, Puns, and Money was previously known as The Practice Growth Podcast until March 2022.
Shawn Terrell (00:01)
So the recent podcast episode about tax harvesting ended with an analogy about lemons. And that's probably a good place to start in this next episode, which will explain a little bit more how to tax harvest and get into the mechanics with that. Because when you analyze if tax harvesting makes sense for you and your situation currently, one of the big things you must decide is, is the juice worth
to squeeze. Hi, I'm Shawn Terrell and welcome to Dentist Puns and Money. Dentist Puns and Money is brought to you by Dentist Exit Planning. At Dentist Exit Planning, we work with dentists who are nearing the end of their clinical career to help them build their financial treatment plan for life after dentistry.
So when it's possible for you to tax harvest in your non-qualified accounts, an important part of that analysis is determining if the juice is worth the squeeze. Put another way, just because you can tax harvest in an account doesn't necessarily mean that you should do it. It's got to be determined whether the time and the energy and the cost.
and the risk of the unknowns about the future makes sense compared to any potential tax savings that might occur before you actually go through and harvest taxes. It's probably worth mentioning as I dive into this what I mentioned about everything when I talk about tax planning, and that's that the goal with it is to create the lowest total lifetime tax bill for someone.
even if that means paying a little bit higher in taxes in any given year than someone otherwise would have had to do all things being equal.
Also, as I said on the last episode, the topic of tax harvesting borders on being too complicated to discuss in a podcast. So I am trying to keep it simple, which means that I will not cover every single angle or possible scenario that can be covered with this topic. So just make sure that you are talking with your tax professional and your financial advisor when you are making these decisions about tax harvesting.
title of this episode is How to Tax Harvest. So let's explain that with an example. When you determine the taxes that are due on a non-qualified investment, it's all about what you paid for something relative to what you sell it for down the road. as a simple, easy example, let's say that you buy
a thousand dollars worth of company stock in some company and you later sell that same amount, that same stock that you bought for a thousand dollars for $800. In that scenario, that would be a $200 loss. Opposite scenario, let's say you take that same thousand dollar stock and you later sell it for $1200. In that scenario, that would be a $200 gain relative to what you paid versus what you sold it for.
The initial basis of $1,000 versus $200 less or $200 more is how you factor in what the gain or the loss is. If you own that stock and then sell it in less than a year, it's going to be a short-term loss or gain. If you own that stock and sell it more than a year later, then it's gonna be a long-term loss or gain. And all of that matters when you're figuring out your taxes that are due at the present.
and in the future because the tax rate for long-term capital gains can be lower than the tax rate that's applied to other items on your tax return. So at a really high level it makes sense to harvest gains when the tax rate on that capital gain for that year is likely going to be lower than it would be or could be in the future.
On the other hand, it might make sense to harvest capital losses when it would lower your taxes at present or potentially in the future. To that point, capital losses can offset capital gains in the tax year that they are realized. If there's more capital losses than capital gains for a given year, then a portion of those capital losses can be used to offset ordinary income as well.
As of this recording, there's a maximum on the amount of capital losses that you can use to offset ordinary income and that max per year is $3,000 as of 2026 when I'm recording this. Also, and this is a big one, if you have more capital losses than gains in the given year, even after you offset some income, you can carry forward those losses to offset both.
gains and ordinary income in future tax years and reduce tax in the future years. But there's a couple catches with doing that. Just a few of the catches, not all of them. Firstly, you have to report these capital losses that you're carrying forward for future tax years on your taxes each and every year while you have them so as to basically tell the IRS what you have and what you're gonna use in the future in a documented way. And that means whether you use them or not.
Second of all, while there is no limit to how much capital loss you can use in the future to offset capital gains, you cannot use more than $3,000 of capital losses to offset ordinary income in a given year. And then also, this is a big one too, you can't just bank these losses and use them at any point in the future when you want to. That would be a really good thing if you could do it, but.
It's sort of a use it or lose it type deal. If you have losses and then in future that you carry forward and then in future years you have gains or ordinary income that are available to be offset by those losses in past years, then you have to use them. It's not like a save it until way down the road and use it then when you're to have the biggest tax bill. You sort of have to use it while you have it until they run out. If you don't, then you basically forfeit them.
There are other things to be on the lookout for with tax harvesting, probably too many to get into much deeper in this episode, but I will dive into more of the big things to watch out for in the next episode. And those things, hopefully, if it's not clear already, will hopefully drive home the point that I made at the beginning, which is with tax harvesting, you really have to decide if the juice is worth the squeeze.
Speaking of taxes, if you would like a reference for the many rules and the current numbers that are in effect, we have a free tax cheat sheet that we could send you. And it includes many of the changes that go into effect now that it's 2026. Whether you are watching this on YouTube or listening to it on a podcast app, if you go to the show notes for this episode and you look for episode resource and click there, we will email you our free tax cheat sheet.
Also, if you are a dentist and you're leaving clinical in the next few years and you want some help talking about a financial treatment plan for your life after dentistry, you can schedule a no obligation virtual meeting with us, with me, with Dentist Exit Planning. And to do that, just go to DentistExit.com and then click on free consultation to pick a date and a time that works best for you.
Final reminder before I go, dentist exit planning is a registered investment advisor. The information presented here should not be used for considered investment, legal, tax, financial planning, or wealth management advice. The information here is for educational purposes only, and past performance is not indicative of future results. Thanks for watching and thanks for listening. I'm Shawn Terrell, and we will talk to you again very soon.