Business taxes in Indiana have not increased over the past 5 years—on paper, they’ve actually decreased or stayed very stable.
But the effective tax burden on dental practices has still gone up due to a combination of local taxes, wage inflation, and structural changes in how practices are taxed.
1) What’s actually happened to Indiana business tax rates (last ~5 years)
Corporate income tax
- 2020: ~5.25%
- 2021–present: 4.9%
👉 That’s roughly a 0.35% decrease (~7% relative reduction) over 5 years.
Pass-through business taxation (most dental practices)
Most dental practices (LLCs, S-corps) don’t pay corporate tax. They flow through to:
- State income tax: ~3.23% (2020) → ~3.05% (2024) → trending to 3.0%
- Local (county) income tax: ~1–3% depending on county
👉 Slight decline at the state level, but:
- Local taxes have crept up in many counties
- Combined effective rate often still ~4–6%+
Sales tax (relevant to dental ops)
- Flat 7% (unchanged)
Big picture
Indiana is actually:
- A top-10 tax-friendly state
- One of the lowest corporate tax states (~4.9%)
👉 So purely from statutory rates, taxes have not increased.
2) So why does it feel like taxes are higher?
Because for dental practices, “tax burden” ≠ just tax rates.
Three big drivers:
A) More income is being taxed (strong collections growth)
- Indiana state revenues are up ~7–12% year-over-year recently
👉 Meaning:
- Practices are earning more nominal dollars (inflation + fee increases)
- That income is being taxed—even at lower rates
Result: higher total tax bills despite lower rates
B) Local + payroll + hidden taxes are rising
For dental practices specifically:
- County income taxes trending upward in some areas
- Employer payroll taxes (FICA, unemployment)
- Property taxes on real estate
- Equipment depreciation changes (less favorable timing vs bonus years)
👉 These aren’t headline “tax cuts,” but they hit EBITDA directly
C) Shift toward W-2 wage pressure (huge for dentistry)
Labor is the biggest expense in dentistry.
- Hygienist wages ↑ 20–40% in many markets post-COVID
-
Those wages are:
- Fully taxable
- Subject to payroll taxes
👉 This indirectly raises the tax burden per procedure
3) How this is affecting the dental profession
This is where it gets interesting—and very relevant to LADD.
1) Margin compression (even with stable taxes)
Even though tax rates dropped:
- Labor ↑
- Supplies ↑
- Insurance reimbursement flat
👉 Taxes are now applied to tighter margins
Example reality:
- 2019: 18–22% EBITDA → taxed
- 2026: 12–18% EBITDA → still taxed
👉 Feels like “taxes are higher” because profit is harder to generate
The 40% Reality: What Stagnant Growth in Dentistry Means for the Future
In 2025, roughly 40% of dental practices didn’t grow at all.
Not decline. Not collapse.
Just… stayed flat.
At first glance, that might not sound alarming. But in today’s environment, flat is the new falling behind.
Because while production may be holding steady, everything else is not.
The Illusion of Stability
Industry data shows that about 60% of practices experienced growth, meaning the remaining 40% were stagnant or worse.
That creates a dangerous illusion:
- Chairs are still full (sometimes)
- Schedules still look “busy”
- Revenue hasn’t dropped dramatically
But underneath the surface, the economics of dentistry have fundamentally shifted.
Practices aren’t treading water—they’re slowly taking on water.
The “Fiscal Squeeze” Is Real
Dentistry in 2025 has been defined by one core reality:
Costs are rising faster than revenue.
- Staff wages increasing 6–10% annually
- Supplies and labs up 5–10%+
- Insurance reimbursements largely flat or declining
The ADA has called this environment a “fiscal squeeze”—where profitability is compressed even when production holds steady.
So if your practice didn’t grow in 2025, there’s a high likelihood your profitability actually decreased.
Why 40% of Practices Didn’t Grow
This isn’t random—it’s structural.
1. Patient Behavior Is Changing
Dentistry is increasingly viewed as discretionary.
- Case acceptance hovers around 40–70%
- Completion rates are even lower
- Patients are delaying or phasing treatment
Even with demand, conversion is the bottleneck.
2. The “Empty Chair” Problem
- ~15% cancellations
- ~7% no-shows
That’s not just inefficiency—it’s lost growth capacity.
3. Staffing Constraints
- ~90% of practices struggle to hire hygienists
- Open roles can sit unfilled for months
You can’t grow if you don’t have the team to support it.
4. Capacity Without Demand
One of the more surprising trends:
- More dentists report being “not busy enough”
- Wait times are decreasing
- Yet spending is up
This paradox signals a deeper issue:
👉 Demand exists—but it’s fragmented, inconsistent, and harder to capture.
What This Means Moving Forward
The 40% stat isn’t just a number—it’s a dividing line.
1. The Gap Between Practices Will Widen
Dentistry is no longer moving together.
- High-performing practices are growing
- Average practices are stagnating
- Underperforming practices are quietly declining
This creates a barbell effect:
👉 Winners and losers—with fewer in the middle
2. Growth Will Become Intentional, Not Incidental
In the past, growth was often:
- Population-driven
- Insurance-driven
- Referral-driven
Today, growth requires:
- Strong patient experience
- Clear treatment communication
- Operational excellence
- Marketing and brand differentiation
You don’t “accidentally” grow anymore.
3. Scale and Systems Matter More Than Ever
This environment favors:
- Multi-location groups
- Systemized operations
- Technology-enabled practices
Not because solo practices can’t compete—but because inefficiency is no longer survivable.
The Opportunity Hidden in the 40%
Here’s the upside:
If 40% of dental practices didn’t grow…
That means growth is no longer evenly distributed.
👉 It’s available to those who execute.
Practices that focus on:
- Case acceptance
- Patient experience
- Team development
- Operational efficiency
…are not just growing—they’re taking market share.
Final Thought
Dentistry isn’t declining.
It’s diverging.
2025 showed us that being a “good” practice is no longer enough to guarantee growth.
The future belongs to practices that are:
- Intentional
- Data-driven
- Patient-centered
- Operationally elite
Comments
Post a Comment