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.
Let’s break it down clearly.
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:
- Dental 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
2) More aggressive tax planning & entity structuring
Dentists are increasingly:
- Using S-corps for distributions vs salary
- Leveraging cost segregation / depreciation
- Exploring multi-entity structures (real estate + practice split)
👉 Tax strategy matters more than ever
3) Accelerating DSO and group growth (like LADD Dental)
Lower corporate tax rates (4.9%) actually:
- Favor scale and consolidation
- Benefit multi-location groups
Why?
- Ability to optimize tax structure across entities
- Spread overhead (including tax/legal/accounting)
- Capture efficiencies unavailable to solo practices
👉 This is a tailwind for groups like LADD Dental Group
4) Bottom-line takeaway
Taxes themselves haven’t gone up in Indiana.
In fact, they’ve slightly gone down.
But for dental practices:
👉 Effective tax pressure has increased because:
- Income is higher (inflation)
- Costs are much higher (especially labor)
- More revenue is flowing through taxable channels
5) What this means strategically for LADD Dental Group
The winning organizations in this environment are doing:
- Scale + density plays (multi-location efficiency)
- Ancillary services (aligners, implants, specialty)
- Tax-optimized entity structures
- Real estate ownership strategies (NNN + depreciation)
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