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You spent decades building your practice. You own the building. Now retirement is on the horizon. What do you do with the real estate?
In Episode 151 of The Dental Boardroom, Wes Read walks through three options — each with very different tax, income, and lifestyle implications. Here is what you need to know before you decide.
The simplest path is to stay the landlord. When you sell your dental practice, the new dentist — or a completely different tenant — takes over your space and pays you rent. Dentists are reliable tenants. Commercial leases are long. The income is predictable.
The downside is that real estate is never truly passive. You will still deal with lease negotiations, maintenance issues, vacancy periods, and vendor relationships. If you retire to travel or spend time with family and want zero responsibilities, managing a property may not align with that lifestyle.
The other limitation: if you need to access the equity in the building — to fund a second home, for example — you cannot do that without selling or borrowing against the property. A line of credit secured by the building is one option, but it adds debt and complexity.
Selling gives you liquidity. You pay capital gains tax on the sale, and what remains can be invested in dividend-paying stocks, bonds, or other passive assets that require zero management from you.
This option makes the most sense for dentists who do not want to manage real estate in retirement, need the cash, or prefer a cleaner break from everything practice-related. The trade-off is that you lose the tax-advantaged income the building was generating, and you hand over a portion of the equity to taxes upon sale.
Before choosing this path, get a clear picture of what you will net after taxes and selling costs. Practice Orbit's free valuation calculator (practiceorbit.com) can give you a solid estimate of your practice sale proceeds. Run the same analysis on your building with a commercial real estate broker.
The 1031 exchange is where real estate wealth-building gets serious. Under Section 1031 of the tax code, you can sell your building and roll 100% of the proceeds into a new, larger property — deferring all capital gains taxes entirely.
Here is how it works: when you sell, your tax basis carries over to the new property. If you bought your building for $2 million and depreciated it down to a $700,000 basis over 15 years, that $700,000 basis transfers to the new $4 million property you purchase. You do not pay taxes on the gain until you eventually sell — and if you never sell, neither do you.
The most powerful application of this strategy is what Wes calls the 'punt': dentists who continue 1031 exchanging into larger and larger properties, deferring taxes indefinitely, borrowing against the equity of the property for living expenses (borrowing is not a taxable event), and ultimately passing the real estate to their heirs at death.
When you die, your heirs receive the property at a stepped-up basis — the fair market value on the date of your death. All of the accumulated capital gains disappear. If your total estate is below the current exemption threshold (approximately $12 million per person, $24 million for married couples in 2026), your heirs may owe nothing in estate taxes either.
This is not a strategy for everyone. It requires ongoing engagement with real estate. But for dentists who are already invested in real estate and want to continue building wealth in retirement, the 1031 exchange combined with the step-up in basis is one of the most effective legal tax strategies in existence.
The right choice depends on your income needs, your appetite for managing real estate, your estate planning goals, and how much equity has built up in the building. All three options are legitimate — but each has material financial consequences that require analysis before you decide.
Work with your CPA and financial planner well before retirement to model all three scenarios. The earlier you plan, the more options you have.
Listen to Episode 151 of The Dental Boardroom Podcast: https://podcasts.apple.com/us/podcast/151-cost-segregation-tax-strategy-for-dentists-part-3/id1518344747?i=1000761386035
Wes knows what's best for dental practices. He's been doing this for a long time and he sees lots of practices. He can tell me how our practice is doing, and what we can do to increase our productivity. With past CPA's, there were no ideas. It was all coming from me, saying "I think I can do better, but I don't know how." I come in to meet with Wes and he says "You CAN do better, and I know how."
PracticeCFO is in hundreds of dental offices around the country. They know what numbers should look like. They know what percentages of payroll, rent and supplies should be, and they will hold you accountable to those numbers, which will really help you stick to your plan and your path of growth and savings. That is invaluable
Whenever something comes up, whether it's building or practice related and we weren't sure where the numbers would go, PracticeCFO has been instrumental in helping us figure that out. I can't say enough of how important that is - that it goes beyond that initial partnership. They make sure this business marriage works.
When I go home from work, I don't spend a whole lot of time stressing about what my books look like, or how much I owe in taxes. By using PracticeCFO, the burden of keeping track of a lot of the big financial numbers and metrics are taken off my plate.
PracticeCFO helped me develop a plan for the future. I have colleagues that work with other accountants that don't have a plan - they just look at the numbers of the practice and that's it. There's no plan for 10, 20 years from now. But with PracticeCFO, you get that. PracticeCFO makes you feel like you're they're only client.
(In reference to his practice sale) What could've been super stressful, wasn't! When picking John and Wes, it was from word of mouth recommendations and other people's experiences from the past that really did it for me. And it turns out that those recommendations were right on the line.
Wes knows the business side of dentistry. His comprehensive plan will organize your personal and professional finances so you can focus on taking care of patients. Massive ROI.
I can’t say enough good things about everyone at PracticeCFO. Everyone on the team is professional, organized, knowledgeable, helpful and kind. They also respond to emails and phone calls immediately and are always happy to help. They have helped me navigate year-to-year as a business owner. PracticeCFO gives me peace of mind that my business is in good hands.
I love Practice CFO! They have helped me obtain a practice and maintain a practice. They are incredible people who are on top of everything and make owning and running the business portion of a practice easy. They couldn’t be better for my business and my sanity. They have every detail of the business and taxes taken care of where all I have to do is show up and follow their easy steps to success!
Practice CFO has the best tools I’ve seen for personal tax and financial planning in addition to top-tier corporate tax and accounting services. I have been very pleased with the level of quality service. They manage my monthly bookkeeping and accounts payable. It is a great system and saves me a ton of time, and it allows us to have monthly financial statements within a week of month end.
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