Financial Realities After Dental School & Six Principles to Follow

by David Chong Yen CPA, CA, CFP; Eugene Chu, M.Acc., CA, CPA

Graduating from dental school is a monumental accomplishment. It is usually accompanied with huge loans/debt ranging from $250,000 – $500,000 depending on if one graduated from a Canadian or foreign school.

Panoramic Perspective

  • If you wish to own your practice, when and where
  • If you would prefer being a long-term associate or leaning towards academia
  • If you wish to have kids, and when
  • The type of dentistry which excites you

The above provides you with your destination. When using a GPS, you are asked to enter your destination, not your starting point.

PA’s, Bitewings Perspective
After you have decided on your destination, focus on your various mileposts along your journey, concentrating on your next milepost, including:


  • Pay off charge/credit card debt, usually first as the highest interest rates (over 20%) are usually charged
  • Pay down student loan debt quickly if you intend to buy your dental practice soon, as this shows banks you are responsible. With some loans, such as Canada and Provincial Student loans, the interest provides a tax credit/break, although in many instances, the interest is higher than that charged by a bank on other loans. In many cases, in spite of the tax break provided, it makes sense to pay off the loans with higher interest rates.
  • Some interest on car loans, car lease payments and car expenses may be tax deductible. Driving directly from home to work (vice versa) is not tax deductible but if one goes indirectly, say, office to continuing education course, then to home, this leg of the trip is tax deductible. A car is not an investment and therefore we suggest being conservative and practical. Given you may get a tax break on your car loan, this loan does not have to be repaid as quickly.
  • Ensure you speak with a tax professional to get a list of items that are tax deductible, items that are not tax deductible, and what records to keep and for how long. Also, if you are a member of the Ontario Dental Association (ODA), obtain your free copy of the book titled, “Dentist’s Tax and Financial Guide” directly from ODA, which provides the above.
  • Prior to getting married or cohabitating with an individual, consider a marriage contract/pre-nuptial agreement/cohabitation agreement. These agreements could protect you financially in the event of a breakdown in a relationship. Consult a family lawyer.

The following six principles provide a good foundation to launch your career:

1. Fishing Rod vs. Fish
We suggest a dentist get their fishing rod first. A fishing rod generates cash. An example is buying one’s dental practice. Fish includes one’s home, car, boat, cottage, etc. and generally consumes, not generates, cash.

Why? Buying a home uses up limited borrowing capacity and puts one at a disadvantage when they are competing against other buyers for the same dental practice. Many areas within Ontario have several buyers bidding on few practices for sale.

2. Rent vs. Buy home
Many dentists emotionally buy a home before their dental practice. Why? Renting is like throwing money away. Is it? The first three to five years of mortgage payments comprises mainly interest, especially if one chooses a mortgage with a 25-year amortization. Rent and interest expense is really the same.

Usually anywhere one buys a dental practice, there are hundreds or more homes available, but only one or two dental practices.

Instead, buy your practice first; with the equity you build in the dental practice, dentists often can buy a home with a larger down payment, thereby reducing home mortgage interest which is not tax deductible.

3. Bet on Yourself
If you don’t bet on yourself, don’t expect others to bet on you. Invest in practical CE courses that excite you and for which you will have patients, shortly after taking the course, to use the newly acquired skillset. It’s difficult for a recent graduate with significant debt to incur more debt in order to invest in CE courses. Use this litmus test: if you can recover the cost of the CE course from additional billings due to your newly acquired skillset within 3-6 months, then proceed.

4. Kinetic vs. Static Energy
These physics concepts apply to the business of dentistry. A new practice with state-of-the-art equipment and little or no patients is emotionally appealing but could lead to financial pain. An established practice with old equipment, repulsive aesthetics and 1600 active patients could be financially rewarding. To develop a new practice into one with 1600 active patients requires pain, sweat and patience. To maintain a practice with 1600 active patients requires much less effort and is generally cash flow positive from the purchase date. With a start-up practice, expect negative cash flow for quite a long time.

5. Perfection vs. Improvement
Many dentists looking to buy a practice will ask us to find them a perfect practice. Frankly, we are unable to locate such a practice. However, we can locate a practice that puts them in a better financial position than if they remained as an associate.

6. Cost vs. Value
Cost is what one pays, and value is what one receives. Many dentists focus on cost and ignore value. We suggest dentists place greater emphasis on value and less on costs. For example, paying extra for supplies, or to your advisors, will put you further ahead if this relationship delivers you a practice you would not have otherwise been able to purchase.

As a recent dental graduate, you are at a fork in the road, faced with many opportunities and responsibilities. The decisions you make now will have pervasive consequences on your future. You are the captain of your ship and control your destiny.

About the Authors

This article was prepared by David Chong Yen*, CPA, CA, CFP, Louise Wong*, CPA, CA, TEP, Basil Nicastri*, CPA, CA and Eugene Chu, CPA, CA of DCY Professional Corporation Chartered Professional Accountants who are tax specialists* and have been advising dentists for decades. Additional information can be obtained by phone (416) 510-8888, fax (416) 510-2699, or e-mail / / / . Visit our website at  This article is intended to present tax saving and planning ideas and is not intended to replace professional advice.

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