Taxes 101 for Dentists: Tax Basics You Should Know – Episode #671

On the first episode of a 5-part tax series of the Dentist Money Show, Matt and Ryan break down the essentials of the tax system and why taxes create so much confusion (and stress) for dentists. They tackle common misconceptions around tax brackets, clarify the difference between deductions and credits, and explain how taxes really impact your take-home income. They also highlight the value of working proactively with a CPA and why understanding your taxes is key to long-term financial success. Tune in to the first episode of our new tax series and learn how basic tax knowledge can help you avoid costly mistakes.

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Podcast Transcript

Matt Mulcock: Welcome to the Dentist Money Show, where we help Dentist make smart financial decisions. I’m Matt here with Sir Ryan Isaac.

Ryan Isaac: Wait, wait, wait, wait, wait. You gotta say it to

Matt Mulcock: Okay. I’m Matt, the mountain Mulcock here with Sir Ryan

Ryan Isaac: Here is Sir Ryan, Isaac and Matt the Mountain MoCo.

Matt Mulcock: Okay. It’s super easy to be like, I’m Sir Ryan Isaac. It’s not like, Hey, I’m Matt, the Mountain mooc. Anyway. Uh.

Ryan Isaac: Thanks. Welcome.

Matt Mulcock: Welcome. Hello Ryan, I have a question.

Ryan Isaac: Yeah.

Matt Mulcock: What is the number one or the top selling vehicle in the US for the last 35 years? Do you know? You know, ’cause you

Ryan Isaac: Okay. Well, I did, I stopped reading this because I wanted to guess it actually, I saw the, what is the top selling, and I, I stopped reading the actual answer. If over that long of a period of time it’s gonna be Chevy or Ford. It just has to be, and I’m gonna say it’s, I’m gonna say it’s a truck. And so out of the two, Is this hot to say I’d personally, I’d rather have a. I’d rather have a Chevy than a Ford personally.

Matt Mulcock: You are causing, you’re gonna cause some drama.

Ryan Isaac: Like a sick, like is that a, like a nice Silverado or something? I don’t know,

Matt Mulcock: You’re gonna

Ryan Isaac: But I’m gonna say it’s a Ford. I’m gonna say it’s one of the Ford trucks and because of price and the average American, I’m gonna say it’s, what’s the lower one? One 50.

Matt Mulcock: Yep.

Ryan Isaac: Okay. That’s my, that’s my guess because of that criteria, although I would prefer something different.

Matt Mulcock: You simultaneously got it right while also offending. Everyone listening

Ryan Isaac: That’s good content though. When you speak the truth and you piss everyone off, that’s like, it’s good. That did it on purpose.

Matt Mulcock: It is the F1 50, 35 years in a row top selling vehicle in the us. It might even be more now. The

Ryan Isaac: Can I actually say I would rather have a Toyota T Tundra over anything? If I had to have a truck over anything, I’d have a tundra over anything.

Matt Mulcock: Awesome. Um,

Ryan Isaac: I’m not even a truck guy, but that’s what I would do. Over a Chevy or a Ford. Sorry,

Matt Mulcock: You know what I’ve been looking at lately and I’m like kind of becoming obsessed with even, I’m not gonna buy a new car.

Ryan Isaac: Well, let’s talk about cars. Oh, re old new

Matt Mulcock: Land Cruiser. Well, no, the 2025 Land Cruiser is like a, they’re doing like an O to the 1958 cruiser and it’s like the same body style. You should look it up 2025. Toyota Land Cruiser.

Ryan Isaac: Okay. You know what? Uh.

Matt Mulcock: so cool.

Ryan Isaac: Let’s see. Based on this initial conversation, Matt, I’m gonna go to the Facebook group when we’re done and just ask everyone, what’s your favorite car right now?

Matt Mulcock: Favorite car right now. I, I like

Ryan Isaac: Next? Not Dr. Not dream like, oh, what’s your dream car like? What’s your favorite car right now?

Matt Mulcock: Yeah. Right now my favorite car and maybe my dream car, I don’t know. Not, not not a dream car, but my favorite car. That’s expensive and I’m not gonna do it ’cause I’m gonna be disciplined with my money. But, um, Toyota Land Cruiser is so cool. Uh, I love it and I love Toyotas,

Ryan Isaac: I do. Well, I’m getting a Toyota next. Actually,

Matt Mulcock: Yeah, I, I like Toyotas. So what does this have to do,

Ryan Isaac: What does it have to, that’s what I’ve

Matt Mulcock: Talking about today. Today. Um, another question. This is a two part question. Uh, what is the top money topic on every dentist mind? Every single year since the beginning of time.

Ryan Isaac: It’s gotta be taxes.

Matt Mulcock: There it is.

Ryan Isaac: Well, that’s unfair ’cause I know what we’re talking about today.

Matt Mulcock: You

Ryan Isaac: About taxes for, are we talking about taxes? I’m talking about taxes.

Matt Mulcock: Ooh, that would’ve been a better intro. That would’ve been a better

Ryan Isaac: Taxes. Yeah. This is the number one. It’s the number one thing. I was, uh, joking with a friend. Um, not related at all to this industry or dental at all. And, um, I was saying, they were really surprised ’cause I was saying, oh, you wanna know how to pique someone’s interest. Like a, a dentist’s

Matt Mulcock: Peak it. Yeah.

Ryan Isaac: Tax benefits tax free? Which makes total sense. Uh, dentists, you know, statist, statistically highest income earner, uh, profession in the country and it’s earned income, so, which I’m sure we’ll get to. So tax rates are through the roof for dentists. Just period. End of story. We can, you know, pay your taxes. See you next time.

Matt Mulcock: Yeah, there it is.

Ryan Isaac: That’s the advice.

Matt Mulcock: Thanks for listening, everyone.

Ryan Isaac: That’s the advice. Pay your taxes. We’ll see you next time. Yeah.

Matt Mulcock: No, you’re totally right. This is always top of mind. I just had a consult, a conversation, right. We talked to hundreds of dentists all over the country every year. Just had one with an associate. And so an associate just finished residency and asked what’s on their mind, what are they dealing with, is financial concerns. And every time it’s, it’s, it’s some combination of things, but almost every time top of that list is tax strategies or taxes, or how do I avoid paying taxes?

Ryan Isaac: A million percent.

Matt Mulcock: We thought, uh, why not do a little bit more, more in depth discussion? Kind of planned out, not the way Ryan and I usually do it, which is like, oh, we gotta do a part one, a part two of

Ryan Isaac: Is what happens when you like, get, be, become bigger and you have a marketing team. They’re like, you guys, the the way you do things is absurd and you can’t do it anymore. And

Matt Mulcock: We’ve been doing this, we’ve been doing this. Now, Ryan, I mean, not me personally, but the, the, you’ve been doing this for 10 years now, as just on the podcast. I’ve been doing this for five with you. and it is funny how we just had this meeting with our marketing team and they’re like. Okay. Like our whole content team, and they’re like, we gotta get better. We gotta get, we gotta get more, more organized around this planning things out.

Ryan Isaac: It’s all right. It’s where we started. I mean, we, we used to script everything. Even Justin used to write jokes for me and Reese to say, literally it was so awkward. And then he’d hold the timer. He was cute. He, I forgot. Cue. Cue in the room.

Matt Mulcock: Yeah.

Ryan Isaac: Cue in the

Matt Mulcock: You know what’s, you know what’s funny is this podcast has been going on well before podcasts have become a thing.

Ryan Isaac: Yeah. Uhhuh,

Matt Mulcock: And now we’re trying to get back to our roots of more. More

Ryan Isaac: Do we do? We’re doing the same, the old intro

Matt Mulcock: Yeah, we’re getting back to our

Ryan Isaac: We’re, we’re outlines are better and more planning ahead.

Matt Mulcock: You know, Ryan, how they say, you know how they say fashion kind of has cycles, right? Fashion just keeps coming back around. I think it’s the same thing with this.

Ryan Isaac: It’s the, uh. It’s the crew sock of, uh, podcast formats. You know, we went like no show for a while, no socks for while. We went ankle for a while, but we’re back to crew

Matt Mulcock: We’re back to the crew. Yep. Mid ankle. Is that where we’re at? Mid ankle?

Ryan Isaac: Oh, well mid ankle is like an ankle sock from what I understand. A crew is like not

Matt Mulcock: Oh, like mid Midcalf.

Ryan Isaac: Like it’s, it’s like between calf and ankle

Matt Mulcock: Got it, got it. Okay. Okay. Well,

Ryan Isaac: Sock.

Matt Mulcock: Sock, we are the socks of podcasting.

Ryan Isaac: Getting back to it. Blah, blah, blah, whatever. Anyway, taxes, dentists, and taxes. The sexiest subject the most, besides the home, probably the most emotional subject for dentists besides like the home we buy. Yeah.

Matt Mulcock: For sure. Yeah, I think this is probably more top of mind. Home is more emotional, but they’re both up there. Uh, so this is part, this is part one of probably five. Part one of five. We’re gonna do a whole tax series. Not by the way, not every, so it’s not like it’s gonna be this week. And the next week’s part two, we’re gonna kind of spread this out, but a attack series. This is episode one. Um, and today we want to talk about the basics. So just understanding how the tax system works at a high level, and kind of why not understanding it is risky and some of the common misconceptions we hear. Common mistakes we hear from, from dentists not understanding, things like tax brackets and just how the system works.

Ryan Isaac: To normalize this a little bit, Matt? I think to, just to validate everyone, most people do not understand the basics of taxes. Most people in general, not just in generally,

Matt Mulcock: Nine out of 10,

Ryan Isaac: For sure. 8.7,

Matt Mulcock: Eight point. Yeah, you’re probably right. 8.7. Yeah.

Ryan Isaac: No, no. Most, most people don’t. We’re not taught this anywhere. We’re not supposed to. I mean, it’s just like the basics of investing. Or, you know, debt, uh, we’re just not taught this stuff anywhere. So there’s nothing wrong with not understanding the basics, and that’s why we, I mean, that’s why we stick to the basics in so much of our content anyway. There’s just, you know, you can never learn it enough over and over again. So, yeah, the basics of taxes, I like this. Uh, that’s probably what we’re qualified to talk about anyway. When we get, if we get a little bit more

Matt Mulcock: Before the basics? What’s before the basics maybe?

Ryan Isaac: Building blocks of the basics. It’s like the atoms

Matt Mulcock: We’re like the amino acids of

Ryan Isaac: We are the am amino acids of the protein

Matt Mulcock: Of the protein profile

Ryan Isaac: Gosh. Geez. Anyway, okay, so

Matt Mulcock: So why, like, why does this matter? what’s kind of the reason we’re talking about this? I think for me, and I I want to ask you, well, lemme ask you, Ryan, why, why do you think this matters so much? To have the basics down? You just said one of them that.

Ryan Isaac: Yeah.

Matt Mulcock: We don’t understand.

Ryan Isaac: Misunderstood. Highly misunderstood. I think when the basics of taxes are not, understood Well. maybe one of the, the wor not worst outcomes, but most like stressful outcomes from, from that and for dentists is they, um, they’ll get really like stressed out and worked up that they’re doing something wrong. You know, because the stories of taxes are kind of like the stories of crypto investing. Everyone’s a freaking winner and everyone’s got the system nailed and has all the secrets, you know, but for some reason, no one else does. You know,

Matt Mulcock: Yeah, just them The one. Just the one selling the course? Yeah.

Ryan Isaac: Just the ones selling the course,

Matt Mulcock: 4 99. They just happen to have all the secrets.

Ryan Isaac: Have it all. No one else know. None of the, uh, highly educated, thousands of highly educated CPAs around the country know these things. Just like. The one guy on Facebook. But, uh, what ha what happens is like, there’s just so much myth around taxes and so much misunderstanding. I think it just causes. A lot of unnecessary stress. And then what happens is people skip over basic things that are actually helpful in search of like really exotic things that probably aren’t even real and might even be too risky or illegal. in order to like lower their taxes, that might not even be an issue in the first place. You know? And the stories of taxes are always like, I make twice as much as you and I pay zero taxes. And then that just gets. Perpetuated from the next friend to the next friend is like, I know a guy, you know, he makes $10 million and pays zero in taxes. It’s like, well, does anyone actually know the numbers here? Has anyone FactCheck that?

Matt Mulcock: Yeah. Or like, uh uh, yeah, like the other one that this comes up a lot, especially right now in the political landscape, uh, and this is always the case, but I think it’s, it’s the volume’s turned up now. Just for example, and again, this is not giving a political opinion. This is just what you hear. It’s kind of in the same vein as what you’re talking about, which is X billionaire only paid X, Y, or Z in taxes. You know, why are you getting screwed? It’s like that comes back to a fundamental misunderstanding. Well, the person putting that out there is either clout chasing or they misunderstand, or they’re trying to get you to buy something. Um, but on the, from a viewer’s standpoint, when you believe that. That comes from, and again, we have empathy because it’s really hard to understand, but that comes from like you getting worked up about. That comes from a fundamental misunderstanding of how, of how taxes work.

Ryan Isaac: Totally. Totally. And you’re right, those stories, they’re everywhere. Those stories are all over the place. And it’s because it’s probably one of the best tools to sell stuff is, I mean, it’s ’cause it’s

Matt Mulcock: It is the tool.

Ryan Isaac: It is the tool, tax free dot, dot, dot name, any investment throw tax free in front of it. And then, and it makes sense. I mean, dentists pay more money in taxes than average. People earn in an entire year, easily, like sometimes by

Matt Mulcock: Yeah, it sucks. It sucks. Yeah.

Ryan Isaac: Especially when you know, you’re on the younger, end of your career and the other giant chunk of your money, multiple six figures, is going towards practice and student loan debt. You are like between those two piles. It could be like. 80% of your money, you know, and it’s just like literally. and that’s common. And so it’s very painful and it makes all the sense in the world why we would try to avoid it at all costs. So yeah, the basics, just like everything are really important to understand.

Matt Mulcock: Yeah, I think a couple things, uh, at, at its worst, kind of the worst things that we, that this can lead to is, the proverbial letting the tax tail wag the,

Ryan Isaac: Yeah, talk about that. Talk about that. That’s so important. And this happens over and over and over and over to everybody all the time.

Matt Mulcock: Yeah. This comes from, this happens a lot in dentistry, like you just said, it, that tax, anything, anything in the, in the title of like, we’ll show you some secretive taxes. It’s a really effective, it’s a really, really effective selling tool. and we’re saying we understand. We understand why you’d want to believe that lie that like this person who’s ever posting whatever about it. Has some secret. We, we want to believe that. Um, but what we often see, again in the worst case when we say like the tax tails wagging the dog, is that you are chasing, let’s say losses or you, you’re chasing something to maybe save some money on taxes when the overall net to you is actually net negative.

Ryan Isaac: Yeah. It’s actually, yeah. You, you actually cause yourself more pain or harm or loss in order to save some taxes. Yeah. Super common. I

Matt Mulcock: Very, very, very

Ryan Isaac: The time. Mm-hmm. I was gonna, I mean, should, I mean, we could talk about a fitness, health analogy, but it’s

Matt Mulcock: Don’t do that. Go ahead, please, please, please do

Ryan Isaac: Never do that. Uh, I mean, it, it’s, it’s the

Matt Mulcock: We haven’t heard one for a while.

Ryan Isaac: Yeah. It’s the, it’s the diet pill of the financial world. Tax, tax free. Something is the diet pill of the financial world. And, and, uh, so is passive income, and that’s a different episode,

Matt Mulcock: So, okay, let’s make that analogy then. So this would be like. the tax tail waving the or wagon, the wealth building dog, the health equivalent of that. Go, go with me here. Tell me if this is right. This should be like, I, I took a pill that got me shredded. I’m now 7% body fat, but I died of a heart attack the next day.

Ryan Isaac: Yeah, yeah, yeah. My lifespan was shortened by a decade

Matt Mulcock: Alright. Yeah. I, there you

Ryan Isaac: Yeah.

Matt Mulcock: Maybe not as dramatic, but I cut 10 years off my life.

Ryan Isaac: And that is absolutely what happens in health and fitness and the supplement industry. Uh, and yeah. Oh, it’s absolutely what happens. Yeah. You destroy your actual long-term health and longevity for some short-term like gains and Oh, yeah. Totally.

Matt Mulcock: Or just, just again, while we’re going along that analogy, like that is the worst case scenario. But what happens a lot in the fitness industry, and the same thing with taxes is I’ll take this pill, right? more commonly what’s gonna happen, it might not cut 10 years off your life, but what it’s gonna do is it’s going to hurt your wallet. You’re gonna spend money on things that actually aren’t doing anything for you.

Ryan Isaac: Mm-hmm.

Matt Mulcock: Uh, again, in the fitness industry, same thing with money or the financial world. You’re chasing something. You’re chasing ghosts, basically, that people are putting out there of saying like, we have this secret. We see it in all, in all walks of life. The two walks of life that Ryan and I only know, well, you know, three, you know, surfing as well, but it’s basically fitness and, and finance, fitness and money. So that’s why the only, our, our analogies are so.

Ryan Isaac: Is that the next pod, fitness and Finance. Is that the next podcast?

Matt Mulcock: Steal it. I already have it locked and loaded. Ready to go.

Ryan Isaac: I’m gonna do finance and fitness then.

Matt Mulcock: Okay. Well, no, you’re my, you’re we’re hosts

Ryan Isaac: Well, we’re co-hosting. We’ll do two. We’ll do two. Yeah, yeah. No, it’s, you’re totally, those are, I thought those are really good analogies. ’cause it happens all the time and it happens in small ways, meaning, um, maybe year over year someone is, uh, you know, chasing some kind of like tax reducing strategy that’s smaller. But it happens in big ways. We’ve seen people take proceeds from a huge practice sale. Put them into, investments that come with a hefty tax deduction or write off purely because the investments are so bad. You know, I mean, which is one of the questions here, it’s just we have to stop and ask ourselves, wait, why is the government, the government, out of all things, willing to take less money from us in order to buy this investment? Like, why on earth would the freaking government accept less money? From me, um, who they’re trying to bleed dry all the time at every turn, you know, in order to buy this investment. Like, why could that possibly be? And so we’ve, we’ve seen that, we’ve seen huge, huge chunks of money go into investments that aren’t in someone’s best interest, simply because upfront there’s a tax, a tax deduction of some kind.

Matt Mulcock: I am glad you brought that up, Ryan. ’cause as we start to go through this whole tax series again today, we’re only gonna get into like the basic, basic stuff. The, the pre basics ’cause that’s all we can handle. but I think that’ll come up later on in this series when we talk about like the congressional intent of certain tax laws. Um, and why it’s important to understand that. I’ll just give you one quick example that we’ll go deeper and I’m sure later on in the series, but like, people talk about real estate, right? what is the intent of of incentivizing real estate or investing in small businesses? What is the government trying to do there? I think understanding the basis of that, like anything is gonna help you make better decisions and understand how this works. So when you go to go do like the r and d tax credit as a gp. If you understand the underlying congressional intent of the RD tax credit, you’re gonna understand are you being sold something or is this actually falling in line with congressional intent? I think it’s a

Ryan Isaac: I like, I like, yeah, I like what you’re saying. I mean, you’re just saying when you understand these things better, um, you’ll, you’ll spot the bad advice more easily. you’ll see things for what they are. I’m also glad you said it that way too, because I’m being a little bit harsh and dramatic. Sometimes the government incentivizes us. To invest in things that are actually for everyone’s, you know, better interests, some,

Matt Mulcock: For sure.

Ryan Isaac: Business things, and some real estate things for sure. And it’s not all scammy garbage, right? So a lot of it is, but

Matt Mulcock: A lot of.

Ryan Isaac: Maybe not scammy. Just, just not super, it’s just not top tier, you know? It’s like, it’s not high quality. So,

Matt Mulcock: Well, no. So what people, what meaning the government will put something out with true intent behind it, but then what the shyer, shady salesman will do is take that, manipulate the congressional intent and be like, here’s how you find you, here are the secrets. It’s like if you understand those basics, you’re, you can see through that crap.

Ryan Isaac: You can spot. Yeah. They take a gray area and they build a business model that’s not gonna last for more than a few years, but they build a business model out of the gray area, sell the crap out of it to everyone. ’cause it, it sells. I mean, one of the most recent examples we saw, not that it was all, there was congressional intent and there was direct, positive impact for people. But the ERC stuff that happened, I mean, same with the idle loans and PPP, There was direct positive impact for people who actually needed it. But then there was the gray area, and especially ERC, I mean, we saw a whole industry come up overnight, right. Of

Matt Mulcock: These pop up shops that disappeared just as

Ryan Isaac: ERC stuff. And then as soon as they were like, oh, we’re probably gonna audit this stuff pretty heavily, it was like, boom, everyone’s gone.

Matt Mulcock: Gone. Yep. Yep.

Ryan Isaac: Yeah. And I mean, clients are still sitting on some of that money, or, you know, anyway, but yeah. Oh, that’s a, that’s a recent one we saw. I like the idea again. You don’t have to know a ton. We can, we can go back to health and fitness. You don’t have to know. The most detailed, complex stuff to spot something shady. You don’t, you, you, if you know some basics, you can keep yourself out. If I had to throw out a percentage, this is arbitrary. There’s no studies here, but if I had to throw out a percentage, knowing the

Matt Mulcock: Show, it’s our studies.

Ryan Isaac: My study, which has just happened in my brain two seconds ago, is that if you know the basics, you’re gonna stay out of like 70 to 75% of trouble by just the basics, you know? So I like that. I, I like

Matt Mulcock: think you’re right. I think it’s higher than that too. In my mind. It makes sense that it’s higher. totally agree. let’s talk about, common mistakes, Ryan. So we’ve, we’ve kind of set the stage of this tax series, part one.

Ryan Isaac: Mm-hmm.

Matt Mulcock: Common mistakes we see. I’m just gonna throw these out kind of one by one. Get your reaction to them. So number one, and again, this is a no particular order, these are just common mistakes that we see. Again, when we talk about understanding the basics, what it, it can lead to mistakes. Here are the common mistakes. So number one, thinking all your income is taxed at your highest bracket.

Ryan Isaac: Yeah. Oh yeah. Um, actually before I answer that, I like what you put here in the outline, um, about fearing success and optimizing for success. Will you expand on that a little bit because I think it bleeds into this, this question here

Matt Mulcock: Totally, yeah. This is exactly, these kind of go hand in hand. So yeah. So fearing success.

Ryan Isaac: Sorry. What do you hear from people around that? Like what are the real life, uh, comments you hear about people dreading making more money?

Matt Mulcock: Yep. Oh,

Ryan Isaac: That it’s taxed a certain way and it’s pointless. It doesn’t even matter.

Matt Mulcock: That’s what it is. I mean, I, at, at its worst is this misunderstanding that. If I make more money, it’s all going to taxes. It’s just all gonna go to taxes. My, I don’t want to get to the next bracket because my tax bill’s gonna go way higher.

Ryan Isaac: Yeah.

Matt Mulcock: Doesn’t even matter. So, yeah, that’s a, I think there is a, there is a fear and like that’s holding someone back from maybe pushing harder. Not saying that they should, maybe they don’t wanna push hard, but you shouldn’t let taxes or the fear of taxes be the reason why you’re not pushing more.

Ryan Isaac: Yeah.

Matt Mulcock: So yeah, I think it’s a huge thing.

Ryan Isaac: Afraid of success, afraid of higher income, afraid of more money. So the question that you asked was, people thinking their income is taxed at, uh, at your highest

Matt Mulcock: Just that’s a common mistake. Do you hear this?

Ryan Isaac: Yeah, they just, they just feel like, oh, and they, they’ll usually round like it’s 40, 45%, or usually it’s like half, they’ll be like 50% of my, you know, half my money’s taxed. So no matter what I bring in, and it’s not like it is, kind of goes into the second question, the difference between marginal and effective. You can go ahead and take that, but that’s the misconception. You wanna explain that a little bit?

Matt Mulcock: That’s the next, exactly, that’s the next mistake we see all the time, which is people not knowing the difference between marginal and effective tax rates. marginal being every kind of rung. Right. So we, and this is another reason we’re trying to keep this kind of evergreen, but we’re recording this in, in early July of 2025. They just passed the new, you know, Trump just got his new tax bill. passed the, the big beautiful bill and, um, there’s been a lot of talk of, of what, what this is. You know, this, this extended and made permanent the tax brackets, right, which are the marginal brackets. Um, that’s a different, that’s very different than your total income having an effective rate, which is a prorata accumulation. Based on how much money you’re making of the combined marginal rates of your income, that’s a huge, huge misconception.

Ryan Isaac: Yeah, a huge difference. Yeah. And, and where one of those is every chunk of money just sits in its exact percentage of tax. And then Yeah, then you, you, what we’ve measured for people is we want to know really what’s the effective tax rate. What percentage of your overall money are you paying in taxes? Uh, where is it all going? So that becomes a problem. I’m trying to think of the, of other areas that I’ve heard from clients. For sure. People do fear success and they almost feel like making more money is pointless. again, I think it’s just one of those things when they assume that all of their money is taxed at the highest possible level, so it, they’re just losing out. It, it does, it just creates more stress and urgency and I guess more panic actually. stress and panic around doing things that. Might not be in their best interest in order to reduce that. And some people will say like, oh yeah, 50% of my money’s taxed. It’s like, well, no, effectively 27% is, which, I mean, we wish it was zero, but you know, it’s often less as a percentage than people think. Do you, do you agree with that? Do you think it’s often as a per percentage that it’s less than

Matt Mulcock: It absolutely is. It absolutely, almost every time is their effective rate is far lower than they think because they’re only thinking of their marginal rate, and the effective tax rate will always be less than your marginal rate. So yeah, I, I think that’s true. I think more times than not, they’re gonna think, dentists think they, they pay more as a percentage than they actually do.

Ryan Isaac: Yeah, I, and we’ve, man, we’ve spent so many years like gathering this data, benchmarking it, and tracking it. Do you find that on average dentists are like most people, we all, most of us assume we’re paying more than we should, or we pay too much in taxes or, you know, there’s gotta be something else we can do. But then when you measure it, do you find that it’s like, nah, it’s pretty in line actually. Or it might even be a little less than some averages? Do you find that when you see the

Matt Mulcock: You’re saying, do I find it or does the dentist agree with that?

Ryan Isaac: Uh, no. No, no. Do you, do you find that from the data that you see objectively

Matt Mulcock: Oh yeah. Yeah. I mean, I think it’s always, I shouldn’t say always. It’s oftentimes, you know, I’ve done this long enough now to see how much dentists are paying not only as a percentage, but a raw dollar amount. And it’s a lot of money. Like it sucks,

Ryan Isaac: The raw dollars is what kicks you in the

Matt Mulcock: It, it’s

Ryan Isaac: To use a dental metaphor here, you know, it’s a

Matt Mulcock: To use a dental metaphor

Ryan Isaac: It’s a

Matt Mulcock: To use it, to use a dental dad joke,

Ryan Isaac: Yeah.

Matt Mulcock: What’s red and is bad for your teeth.

Ryan Isaac: What?

Matt Mulcock: A brick. You know what I mean? It’s like getting a brick to the teeth, like on home alone. Two suck brick kid, you know,

Ryan Isaac: Uh, we’re a few minutes past two. We’re a few minutes past two 30, which would’ve been a better time for that joke. But anyway.

Matt Mulcock: Would’ve been better. I don’t know what you were just, oh yeah. So as far as it being in line, so, yeah, again, when you get to an income level that we, the dentists we work with, oftentimes it’s very natural for them to be like, what else can we be doing? I don’t want to do this. I don’t wanna pay this much in taxes. But yeah, I think a lot of times we review the data and we’re like, look, here are the things that we can do that are really, really solid tax avoidance strategies that we should be implementing. And then these kind of one-off scenarios of like whether you built a new building or you in, you know, you have some big deductions one year, but other than that it’s like this is what we’re doing and you are totally in line.

Ryan Isaac: Yeah,

Matt Mulcock: Everything else is just gonna get you in trouble. That happens all the time.

Ryan Isaac: Happens all the time. The, the next line I wanted to ask you about something, but it actually goes right into the next question, which is confusing tax deductions with tax credits. first of all, explain the two and then I’m gonna ask you a different question.

Matt Mulcock: Yeah, this is always confused where the best way to describe this, I think is a tax deduction lowers your taxable income or a tax credit lowers your actual tax bill.

Ryan Isaac: Yeah.

Matt Mulcock: Very, very

Ryan Isaac: For dollar.

Matt Mulcock: Dollar for dollar to tax credit, dollar for dollar tax deduction is only reducing your a GI. and so

Ryan Isaac: And that’s complex. I mean, huge difference and it is complex and it’s easy to understand. My question around that was kind of related to that was why it is so hard to compare your tax bill with another person that seems to be in your same position. You take two, two dentists, you make half a million bucks a year. How many things can make a difference between their two tax rates?

Matt Mulcock: Oh my gosh.

Ryan Isaac: And why this is so hard to benchmark because we got to this point in our business where we were like, some benchmarks make sense and they actually do inform decisions and tell a decent story. Some benchmarks are so wildly arbitrary based on very individual circumstances that are not comparable. Taxes being one of them, unfortunately.

Matt Mulcock: It’s huge. I mean, kids, so your family size, retirement plan, whether or not you have a retirement plan

Ryan Isaac: And is your retirement plan a simple IRA? Is it a personal IRA? Is it a giant cash balance

Matt Mulcock: Cash balance

Ryan Isaac: That happens to be the practice dynamic you’re in and Uhhuh,

Matt Mulcock: Yep.

Ryan Isaac: Yeah, the house you live in.

Matt Mulcock: Career stage. So, the investments that, like one dentist, you have two dentists making the same amount of money. One happens to be in a traditional part of their career. Meaning they’re doing, let’s say, expansion and they’re making some massive investments to their practice or their building. Maybe they bought a new building and they have deductions. I mean, the list goes on and on and on of things that they could be, one dentist could be putting in place for whatever reason where the other one is not. And they both have the same income on paper, but one tax bill’s grossly different. And not because of some like fancy secret strategy, but because of just different part, just different, different factors in their life.

Ryan Isaac: Yeah, totally. And uh, I was also thinking about, uh, the way people give to charities and make charitable contributions

Matt Mulcock: Another one. Yep.

Ryan Isaac: Can vary. I mean, one person would be zero, another person would be six figures, and, uh, that’ll have a, a huge impact on someone’s taxes. So anyway, the point being. There’s a lot of nuance there and it makes it difficult. Again, this is why the stories between people and friends of like what taxes they pay, even when they seem like their situations are similar. This is why it’s so hard to compare, because so many little nuance things in their lives will change someone’s tax bill year to year, honestly. So, yeah. Okay.

Matt Mulcock: This is kind of connected to that one, but this is a huge misconception and common mistake. But someone believing that a write-off means something is free

Ryan Isaac: You remember? Do you know exactly what I’m thinking about? Do you know exactly what I’m thinking about with this line? Like what clip of a

Matt Mulcock: Oh, yes. I mean, there’s two, but I think the one you’re thinking about is the same. Schitt’s Creek.

Ryan Isaac: Yeah. Schitt’s Creek. when David starts his, uh, his business and he just starts buying stuff, he’s like, it’s a write off

Matt Mulcock: He’s like, who writes it off? I don’t know. The people

Ryan Isaac: Yeah, if you don’t know, just Schitt’s Creek, David Tax write off. Just go find that on YouTube. What’s the other one? Is that the office? The other one?

Matt Mulcock: They do the same thing on, I think it’s the office.

Ryan Isaac: Isn’t that Michael Scott? And he just thinks he’s gonna write things off?

Matt Mulcock: I think it’s this. Yeah. oh no, I might be actually thinking there’s another one. No, no, no. It’s Seinfeld. So an older school. Uh, so Seinfeld, many of our listeners probably don’t even know what that is. Uh, but Seinfeld did a similar scene with write-offs and deductions and, and, and when I think it’s Kramer and he goes. Well, who knows? Like who tracks the write offs? And Jerry Seinfeld goes, nobody knows

Ryan Isaac: Nobody knows. You’re right. Yeah. It is Seinfeld. I, yeah, that’s the exact scene. Um, the next one I think is huge. and this is a shout out and some support to our CPA community, which is, I think there’s a huge misunderstanding about what A CPA does and is supposed to do. do you wanna talk a little bit about that? I, I’m thinking of one angle in particular, but what, what do you, what do you, comes to mind when you think about

Matt Mulcock: Can I put a, as they say, a bow on the write off thing though, really

Ryan Isaac: Oh yeah. Put a bow. Tie it. Tie it.

Matt Mulcock: Um, I’m just

Ryan Isaac: Tie a bow on

Matt Mulcock: Tie that bow, um, bow, that tie

Ryan Isaac: Bow. Do you remember Ty Bow? Wasn’t that a workout

Matt Mulcock: Freaking Billy Blanks. Are you

Ryan Isaac: Was that Ty Bow?

Matt Mulcock: Course. I remember Billy Blanks.

Ryan Isaac: That was Ty Bow.

Matt Mulcock: Are my formative years of me getting into fitness. Yeah.

Ryan Isaac: Bow

Matt Mulcock: I never tie bowed, but

Ryan Isaac: I IP 90. Okay. IP 90 x. And I also bought a Boflex

Matt Mulcock: Of course you

Ryan Isaac: in like 2003.

Matt Mulcock: That should actually be your nickname is

Ryan Isaac: Bowflex.

Matt Mulcock: Yeah. I give you Billy Blanks.

Ryan Isaac: If I was a superhero, like a D-list, superhero, it would be like Bowflex and I’d just have like these bands and I don’t even know what I’d do with them, but I’d be Bowflex. So dope. Okay, anyway. Ty bow.

Matt Mulcock: I wanna tie Bo, I wanna tie Bo Billy blanks his write off. Um, just really quick, just I want to address that really quick of, people, this is a misconception of mean of thinking a write off means something is free. when you really think about what you’re doing, and again, so many dentists don’t realize this. Again, we know, or we have empathy for this, but if you go buy a car for a hundred thousand dollars, that’s over 6,000 pounds that you’re gonna write off on your business. You don’t need. That is a net negative to you. You know, you now no longer have a hundred thousand dollars and you have a car you don’t need. Yeah, you got a tax deduction. But that doesn’t mean you were a net positive.

Ryan Isaac: Mm-hmm.

Matt Mulcock: So I just wanted to highlight, or maybe this is a piece of equipment in your office. It’s just gonna sit there and collect dust that your CPA convinced you to buy because they want to lower your tax bill. It’s still a net negative to you. Write offs are not free. I just wanted to maybe tie that.

Ryan Isaac: Well, let’s actually just add onto that a little subcategory, buying things as a tax strategy. That’s just what reminded me of that. I mean, probably not a lot to say other than that’s a thing a lot of people assume is tax strategy, and that’s not, it’s just buying things, often buying things you don’t need and buying things your practice doesn’t need. Chris, I think, um, man, that might be a good topic with Christine sometime around practice.

Matt Mulcock: Would be huge. Yeah. Be great.

Ryan Isaac: Stuff, buying things you don’t need.

Matt Mulcock: An example of this really quick, just while we’re on that topic, uh, I’ve never forgotten this. I’ve mentioned it before, but it’s worth repeating. Had a CPA one time, good friend, who we were talking about this exact conversation, and he said, what he tells clients now, which I love, is, Hey, you want to lower your tax bill by buying something you don’t need. You can just, I’ll just double my fee.

Ryan Isaac: Oh yeah. Just pay me more.

Matt Mulcock: Just pay me more. You can give me a hundred thousand dollars. Guess what that’ll

Ryan Isaac: More money?

Matt Mulcock: You could expense that to the business and I’ll happily take that a hundred grand and pay tax on it. And he says, every time he says that, the dentist is like, oh yeah, I’ll just keep my money.

Ryan Isaac: Like, no, I’ll just pay the

Matt Mulcock: I’ll just keep my money. ’cause you’re better off keeping it so.

Ryan Isaac: It is, it is wild to me, especially in, maybe this will be part of the tax series. I don’t know, which would be like, what do you do in a big transaction? What can you do? You know, if you sell a practice, what can you do? I think that might be a really interesting, um, installment of the tax series. But you see this a lot, and I would say more, way more often than not, vast majority of circumstances. When you sell a practice, you have a big transaction, pay your taxes, keep your money, move on. Move on with your life, pay ’em, move on with your life. Keep your money to do like actual good stuff with it. Um,

Matt Mulcock: You know what I mean?

Ryan Isaac: Go do some cool for a minute. Yeah. okay, assuming your CPO is handling everything, they’re gonna huge misconceptions around, what CPAs do, what they should do. Also, a huge misconception that somehow collectively. Every CPA is not aware of like the secret Facebook tax-free marketing plan that that one guy has. And we’re not like throwing shade on an actual one guy, the one guy’s a placeholder for

Matt Mulcock: Just whoever. Yeah.

Ryan Isaac: Whoever does the tax-free strategies that your CPA doesn’t know about. So talk to us about this. What is, what is, what are these misconceptions? Where does this come from and how often does that come up with clients?

Matt Mulcock: Oh, this happens so much. Uh, the angle that you just took for sure. I think another piece of this is. Dentists not realizing like they have a role to play in this no matter what. Like you can’t just hire a personal trainer and not show up to the gym. You can’t just like think like, oh, I paid the CPA money. Like they’re gonna, like, there is still some engagement that you have to have and some, and, and number one is understand what is this person actually doing for me? Because just like advisors, you’re gonna have every flavor of CPA. And usually this is again, just generally say speaking, most EPAs are the number one stress they have in their life from a work perspective is people yelling at them ’cause their tax bill is too high no matter what

Ryan Isaac: If anyone wants your tax bill to be lower, it’s gonna be your CPA.

Matt Mulcock: Cpa and, and so what that can lead to, we’ve seen this many, many times, is CPAs living in a short term. Kind of mindset of like, how do we just lower your tax bill?

Ryan Isaac: What do we do?

Matt Mulcock: What do we do to lower your tax bill? And I’ve seen some egregious mistakes and we’ve had to try to help unravel some egregious mistakes. In the worst case of, like, an example comes to mind of like mis improper entity structuring or tax allocation. So allocate or, um, designating yourself as an S corp way too early because, the c not we’re, we’re in the basics. We don’t get too technical, but. I’ll just say we’ve seen some egregious mistakes because the CPA feels so much pressure to give you the, to show you the lowest tax bill possible. So how is this on the client? I think it’s up to you to understand what is the role of the CPA, what’s your role in the relationship. another example I’ll give really quick Ryan, would be if your CPA is helping you, like understand your quarterly tax bill, like what are you paying for quarterlys? And they’re giving you that. Document, like it’s still up to you to pay it. We’ve also seen this happen a lot where dentists just don’t pay that quarterly tax bill and then they’re mad at their CPA.

Ryan Isaac: I want to add, something to the list too that, uh, there’s a, a phrase that gets thrown around a ton, which is like, my CPA’s not aggressive enough. Just the phrase aggressive enough, you know? which I think. Probably is based on a lack of knowledge about basics of tax planning and what happens when you’re an earned income professional in a high tax bracket and what you can and can’t do. You just have limitations. and it doesn’t necessarily mean a, a CPA is not aggressive enough. Now, there are CPAs who will not. Do some things that are probably very acceptable, widely accepted, um, that probably aren’t a problem and that could be considered a little too conservative. Sure. But I think that term gets thrown around a lot. Um, which again, all of these things, all of these misconceptions, um, they just build up stress and anxiety and panic, and then people go searching for stuff that might end up and often does hurt them and their net worth in the end. And so, yeah, just gotta

Matt Mulcock: I love, I love that you brought up multiple times the emotional side of this truly of like the stress and panic and worry that it creates.

Ryan Isaac: Yep.

Matt Mulcock: It’s so unnecessary. So not even the dollars and cents, but it’s like, what are you putting, like what energy are you putting into something that a, again, you’re truly not fully understanding. I’m not saying that accusatory, I’m saying that like step number one

Ryan Isaac: The way it is.

Matt Mulcock: How this works and then to your point, how much that can reduce stress and anxiety. Which can you, how do you can, you can’t put a price on that, like emotional and mental wellbeing. That can, can be solved or at least greatly improved by increasing your understanding of the topic, which is hopefully what we’re trying to do today.

Ryan Isaac: Yeah. So what can we do, Matt? Like where do, where, where do some go from here? What, what can people do? What can be done to mitigate some of this

Matt Mulcock: Yeah, I think.

Ryan Isaac: On the basic level?

Matt Mulcock: Yes. I mean, we’ve already hit a bunch of these. Um, we’ll go through ’em real quick. I wanna focus on the last two. So there’s really four of just, I think, again, we’re saying what can you do, understand how this works. We’ve already talked about how our tax system is progressive. Meaning, meaning the brackets. Imagine you’re walking up a staircase, like your income truly is on that staircase, and every kind of step is a bracket. Just because you make more money does not mean the entire amount of money is taxed at that bracket. So if you, many of our clients are in the 37% tax bracket, the top bracket, that does not mean every dollar is taxed at 37%. Again, that’s the difference between which goes into number two, marginal, which is your highest tax rate or your next dollar earned. Where you’re effective is just your average across all. I think understanding those is really, really critical. Anything you wanna say to those?

Ryan Isaac: No, no. I think we hit, that was great. That’s great. Just ba again, basic knowledge here. If nothing else, we’ll just give people a peace of mind of going like, okay, I know what it is now. I’ve quantified it, which I think is really helpful.

Matt Mulcock: Yep. And then the next two, we want to just highlight as well, I think understanding there’s four main types of income that are taxed differently. And again, I think this is a huge misconception for dentists is

Ryan Isaac: Totally agree.

Matt Mulcock: Understanding or misunderstanding the difference. You just said one of the biggest problems. I, I guess definition of first world problems for a dentist is that majority of their income is ordinary income. Is, is, is service income from a service

Ryan Isaac: You’re in. It’s earned income. It’s the profession we’re in. It’s a profession you chose. It is. It is what it is.

Matt Mulcock: And if you, you have a high ordinary income from W2 business profits, whatever ordinary income is taxed at the ordinary income tax rates. And

Ryan Isaac: Those marginal rates.

Matt Mulcock: Yeah. And you can’t really cross over, which is what gets people in trouble. Thinking of things like passive income, quote unquote passive income from things like, real estate or, brokerage accounts. So that’s the next category, which is capital gains, different type of income, different brackets. Those don’t cross over a lot of times when it comes to tax

Ryan Isaac: They have different, they have different, yeah. Tax, tax rates, they have different deferral strategies. You can put off capital gains and different types of investments differently than you can with your own ordinary income. Yeah. Treated totally different. And people who build entire careers and incomes off of. Um, you know, whatever their career is, but it’s based on earned or, uh, capital gains, you know, buying and selling things. They do. They have a different tax rule book that they get to play, play with, and it can,

Matt Mulcock: Speaking of that, Ryan, I mentioned earlier the, the billionaire misconception when you hear this, like, Warren Buffet only paid X percent in taxes. It’s like he’s being, he’s in a different category. Warren Buffet is a multi, multi-billionaire. but he has income. His ordinary income service income is like nothing.

Ryan Isaac: It’s low. Yeah. ’cause he buys stuff. He sells it. He defers the gains. ’cause he doesn’t need the money. They use leverage. They borrow money against the things that they own, which is not taxed. And then it gets paid back when they sell the asset and rolled into the next one. Yeah. Different tax code, different life, different career, different life. Completely different.

Matt Mulcock: And then the other two categories, uh, payroll taxes, that’s still part of like your W2 payroll if you’re an associate. But if even if you’re a practice owner, you’re still gonna have some payroll taxes that’s covering Social security and Medicare. And then the last one is net investment income. So this is for usually high income earners with passive income. You’re gonna have some title tax on that.

Ryan Isaac: Yep. Uh, and then the last part, I’d like to, maybe these are the ones you were talking about, especially the last two. You wanna go through those? I like these. Like what? What is prep planning and strategy. Understanding the difference between these. I think this also understanding these helps people have maybe a better relationship with their CPAs too, if they’re able to provide these things. You wanna go through those?

Matt Mulcock: Yeah, I think, yeah, this goes right along with, uh, with that last misconception, like you said, understanding what a, what a CPA does. So yeah, I think there’s three main categories. There’s tax prep, there’s tax planning, and there’s tax strategy. Very different things. Tax prep is literally just your history, your income, history. What you make this year, what do you owe on your taxes? File it.

Ryan Isaac: Yep. File, gather data, file it. Send it. Yep.

Matt Mulcock: That’s very different than planning, which is looking ahead, how do you reduce your tax bill in the future? This is a really simple example of this is retirement plan that’s, that would fit into a tax planning discussion of, among other things, but tax planning. And then strategy, kind of planning and strategy kind of are synonymous, kind of the same thing, but just aligning your moves that you’re making on the tax side with your long-term goals, with the tactics and strategies that you have in place. So just understand the difference of those is huge.

Ryan Isaac: You know what? I was just thinking, you know when you go to a grocery store and you check out and you use one of their like member codes, like, do you have a phone number with us? And you put it in and then they like recalculate your bill. It’s like you saved $11 at the end and it shows you. I’ll bet dentists would be surprised. Similar to when we show people how much debt they actually paid off, just making minimum payments over 12 months, how much debt actually went down. I’ll bet people would be surprised if we added up. Maybe we can do this in the future business idea. I don’t know. where we, we can show someone, Hey, these were optional things you chose to do maybe in your p and l in your business, personal retirement planning, whatever. That accumulated, you know, $30,000 of tax savings or 50 or 70 or 15 or whatever. It’d be kind of a, I don’t know how hard that’d be, but that’d be kind of a cool, I bet people just aren’t aware that they do make choices. You put a kid on payroll, you know, you like made a contribution to a 5 29 and got a little state tax credit or something. I bet people would be surprised about the amount of taxes they save by some of these basic, boring things that they’re doing year in and year out. And when you accumulate. You know, tens of thousands of dollars of tax savings over a whole dental career. It’s a lot of money and wealth saved by doing boring stuff that no one’s gonna brag about on Facebook, but it’s real, and it happens. I just be, I just don’t think people are super aware of that, so.

Matt Mulcock: Yeah, I totally agree. I’ve done this manually for clients, just showing them, Hey,

Ryan Isaac: Yeah.

Matt Mulcock: Are the things you’ve done. Here’s what it’s saved you in taxes. Just again, something as simple as a retirement plan and showing them the amount of money they put there, what it can lead to. So,

Ryan Isaac: It’s gonna be one of the biggest, most consistent, like intentional things you can do year after year after year is have the biggest possible retirement plan in your practice. Um, yep.

Matt Mulcock: Totally the ordinary and mundane, the basics

Ryan Isaac: Ordinary and mundane. Just do ’em for a long time. Surprising how far you can get in life.

Matt Mulcock: For sure. Uh, okay. I think I feel good about that. Ryan, for tax series part one,

Ryan Isaac: Number one. Yeah. The

Matt Mulcock: Like we hit some basics.

Ryan Isaac: I do, I think the basics. You know, get your steps in, drink your water. Get some sunshine. Get some sleep. Talk to a friend. That’s some, that’s some basics. Building blocks for health, you know, these are the, these, we did the same for taxes today. You know,

Matt Mulcock: Kind of did a two for one. We did a little two for one. We hit some health stuff,

Ryan Isaac: A little twofer.

Matt Mulcock: Lines,

Ryan Isaac: Yeah. Uh, I’ll just say,

Matt Mulcock: You on YouTube to go check out Schitts Creek.

Ryan Isaac: Yeah, go, go Google that and just keep watching tv. Uh, if you have any questions, I would just say go to dentist advisors.com, click the little book free consultation button, and uh, let’s have a chat with a friendly dental specific advisor. Would love to hear from you. What would you say, Matt?

Matt Mulcock: I would say I. Ditto, the same

Ryan Isaac: Out. You just be like,

Matt Mulcock: Out and next. This is part one of a four or five part series and we’ll go deeper with each kind of, each level. We’ll probably at some point bring in, uh, bring in an expert beyond our, our knowledge

Ryan Isaac: Which is episode two,

Matt Mulcock: But just probably two

Ryan Isaac: Might have been this one, but that’s

Matt Mulcock: Have been. Who knows, we just go

Ryan Isaac: We don’t care. We had a good time. All right. Thanks everyone for joining. Matt. Thank you. It’s good being here. Good to see you. Bye-bye.

Keywords: taxes, financial planning, tax strategies, CPA, tax deductions, tax credits, tax misconceptions, tax planning

Taxes