To ensure the greatest access to high-quality dental care, the nation needs an appropriate geographic distribution of dentists. The mounting level of debt among young dental graduates can force them to choose private practice over careers in areas such as public health, teaching, research or the military. The 1997 Tax Relief Act extended limited tax deductibility to student loan interest, but the income restrictions were such that it provided inadequate relief to young dentists. The ADA believes that Congress should expand the scope of that provision to increase both the amount of the deduction and the income and time limits for eligibility. The IRS has inconsistently interpreted tax law regarding which method of accounting cash or accrual dentists and other health care providers should use for tax purposes.
Most dentists prefer cash accounting, in which they pay tax only on revenues they have received.
Accrual accounting would force dentists to pay taxes when services were delivered, even if they had not yet received payment. An inequity in the tax code allows corporations to deduct 100 percent of the cost of employee health coverage, while dentists and millions of other self-employed Americans receive only a partial deduction. Congress has acted to correct this imbalance, but that correction is being phased in over several years and will not reach 100 percent until 2003.