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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 (00:02.818)
So really early in his dental career, Dr. Bill realized that he had to be careful using clinical language with patients.
Shawn Terrell (00:19.022)
So really early in his dental career, Dr. Bill realized that he had to be careful using clinical dental language with his patients. So instead of saying, have decay on 30 that needs restoration, he'd say instead, looks like there's a cavity in your molar. I think we should fix it before it causes you any pain. And I think that's a good example when talking about financial language.
in the financial language that is used by financial professionals like me, using terms specifically like above the line versus below the line when it comes to talking about taxes. Like clinical dentistry is to your patient, above the line versus below the line is confusing language. It's hard to process and take action on information if the language used to describe it, it's not familiar.
Above the line versus below the line becomes even more confusing in my opinion under the one big beautiful bill More on that in just a little bit. But first welcome to dentist puns and money. I am your host Sean Terrell This podcast is brought to you by dentist exit planning at dentist exit planning We help dentists leaving clinical practice in the next couple years build their financial treatment plan for life after dentistry
So just how Dr. Bill or just like.
So just like how Dr. Bill realized he needed to explain dentistry in layman's terms with his patients, it's easier to understand some of these financial concepts if they're explained with everyday language or with everyday examples. And that's especially true with the passage of the One Big Beautiful Bill Act because above the line versus below the line,
Shawn Terrell (02:18.656)
is, again, in my opinion, now even more confusing than it was before. So I'm going to try to explain that phrase, that concept today in a little more detail, with a little more context than is normally given, because I think above the line versus below the line is confusing to 95 % of people who hear it. So let's start with a little background. The line that is being referenced
in above the line versus below the line is the line on your tax returns that lists your adjusted gross income. For reference on Dr. Bill's 2024 tax returns, this line is line number 11 on form 1040, which is usually for almost everyone the first main page on a tax return. So if you're still practicing,
your adjusted gross income is likely going to be primarily the salary that you draw from your practice in addition to the profit distributions that you take from your practice. So think of your above the line number as close to the amount of money you're moving from your dental practice bank account to your personal bank account. Now, like everything, there's exceptions. I'm just trying to give people a broad context for what this number usually is.
If you have already
If you have already left clinical and retired, your adjusted gross income, the above the line number is likely going to be roughly the total that you're taking out of your 401k and your IRAs to live plus the taxable amount of any social security that you are drawing. Now, there are several things that can reduce that above the line number, your adjusted gross income.
Shawn Terrell (04:14.345)
before you get to any deductions or anything like that. But in my experience for a late career dentist that has a strong practice or a retired dentist, there are not many above the line deductions that will really move the needle or make a big dent unless you are still paying alimony on a divorce that was finalized many years ago. As for below the line,
This is going to be the amount that you're above the line number, your adjusted gross income is reduced by when figuring out what your taxable income actually is. So it's sort of figuring out how much of the money that's flowing into your world annually is subject to taxes and how much those taxes are. The below the line number, the amount that you're
adjusted gross income is reduced by is either the standard deduction or it's reduced by the standard deduction.
Your below the line number, that is your adjusted gross income minus any adjustments, is reduced by one of two things. Either the standard deduction, which is a fixed amount based on your tax filing status, like single or married filing jointly or married filing separately, or your below the line number is reduced
by itemized reductions if your itemized deductions in total exceed the standard deduction. So the itemized number or the amount that someone who itemizes can reduce their taxes by is different for everyone while the standard deduction is the same for any given person with the same tax filing status. Now, the standard deduction tends to go up a little bit each year to account for inflation.
Shawn Terrell (06:15.946)
But relatively speaking, the standard deduction is a lot higher than it used to be, or a lot higher than it was before the many, or a lot higher than it was before the many various tax legislation reforms that have taken place in the last eight to 10 years. So I heard a stat that 10 years ago, 33 % of people itemized on their taxes, but last year only
10 % of people itemized on their taxes, which means that the increased standard deduction relatively speaking compared to where it used to be many years ago is high enough now that it sort of phases out lot of people that could itemize before, but now it's just easier and more financially, it's more financially advantageous to take the standard deduction.
So I didn't verify that 33 % versus 10%, but I heard it from a pretty reliable source. So I'm gonna go with it here. The increased standard deduction that came to be in the last eight to 10 years seemingly made taxes less complex for many people because as I just mentioned, a lot fewer people, there was a lot fewer people that it made sense to itemize with the higher standard deductions. So a lot.
less people had to keep track of receipts and track expenses in order to figure out what their itemized total was at the end of each tax year. But the big beautiful bill seemingly sort of reopens the door on a lot of this because it adds a category of deductions that can reduce someone's taxable income further, even if they are using the standard deduction.
So this is a little bit confusing, so I'm gonna say it a couple of times. There are now deductions in addition to the standard deduction. The one big beautiful bill includes deductions that are in addition to the standard deduction. deductions before that you had to sort of itemize to qualify for, now you can still take the standard deduction and qualify for some of these deductions. And...
Shawn Terrell (08:35.578)
If that isn't confusing enough, some of these aforementioned deductions after the standard deduction, if you follow that, are considered permanent and some are considered temporary. Now, when you're talking about taxes, permanent is sort of a loose term because it's just permanent until another legislation or another law changes what was permanent into something different. So use finger quotes.
But guess what I mean by that is it's not set to expire, whereas some of these deductions with the standard deduction are scheduled to expire without any intervention or any law changes between now. And a lot of the ones that are set to expire are going to expire at the end of 2028.
Shawn Terrell (09:28.315)
These new deductions, in addition to the standard deduction, include a deduction for charitable contributions for those that do not itemize and also a deduction for car loan interest for those that qualify. There's some catches related to people qualifying for that. And the big one is an additional deduction for those that are older than 65, some potential real tax savings
with this one, although it's worth noting this additional deduction for seniors is only good through 2028. And we are going to dive deeper into that specific deduction for seniors that's good through 2028 on the next podcast. So I know a lot of these explanations don't have a catchphrase or a slogan like above the line and below the line. But I hope that while I don't have some buzzword to make all this immediately easy to remember.
The slower, more detailed explanation makes it easier to understand what some articles and maybe what you're hearing from other dentists saying in passing conversation about taxes when they reference above the line versus below the line. What Dr. Bill did not have in a clinical setting and maybe you can relate is a chunk of time to explain a procedure in detail to a patient. So that's sort of what I'm hoping to do.
with the podcast is just go a little bit deeper into above the line versus below the line. So it's easier to understand instead of people just hearing it and nodding their head, but really not knowing what's being said. If you'd like to learn more about how the OBBA applies to you into your situation, we do have a free checklist we can send to you. Whether you're watching on YouTube or you're listening on a podcast app, go to the show notes for this episode.
and look under episode resource. If you click there, we will email you our OB-BBAA checklist. I always want to say it fast, I have to count how many Bs are in there. I think there's three. Also, if you are a dentist leaving clinical within the next few years and you would like a personalized one-on-one consultation with us with dentist exit planning, you can schedule a no obligation virtual meeting.
Shawn Terrell (11:49.946)
with us and to do that you just go to DentistExit.com that's our website and then click free consultation on the top right corner of the home page and you can pick your time and date that you want to talk via zoom. One reminder before I go DentistExit planning is a registered investment advisor the information presented here should not be interpreted as investment, legal, tax, financial planning or wealth management advice.
It's for educational purposes only and past performance is not indicative of future results. Thanks for watching and thanks for listening. I am Sean Terrell and we will talk to you again very soon.