3 IRS Dental Implant Discount Plans: Tax Deductible Savings

Did you know that the Internal Revenue Service (IRS) offers three different dental implant discount plans?

Your dental implant expenses are tax-deductible in the United States per IRS guidelines, clearly stating that payments made for artificial teeth qualify. ^[1]

Follow along as we break down the hidden features, benefits, and caveats for each of the three options and illustrate the potential savings.

Your discounts could reach up to 39% or more of the total price, provided you choose your ideal option and take proactive steps before starting treatment!

Full-Mouth Dental Implant Discounts: Itemized Deductions

The first IRS dental implant discount plan involves itemizing your deductions when you file your taxes by April. This alternative works best for the most expensive dental implant procedures (full-mouth restorations or all-on-four upper or lower jaws with bone grafting) because your expenditures have no ceiling.

You claim your itemized deductions after paying the dentist. However, proactive steps before undergoing treatment help you maximize savings because you must surpass two expense floors.  

Itemizing Hidden Feature

Two hidden features of itemizing dental implant tax deductions combine to reveal a strategy to surpass the two expense floors and maximize your overall savings.

1. You can deduct expenses in the calendar year you pay the provider rather than when the dentist performs the treatment
2. Consolidating these payments into a single calendar year helps you overcome the two critical hurdles (see the caveat sections below)
   1. Helps expenses exceed the standard deduction
   2. Avoids double-dipping on excluded expenses

Dental implant financing allows you to pay the provider a hefty lump sum in a single year to unlock the most significant savings. Later, you repay the lender in 24, 36, or 48 monthly installments.

Itemizing Benefit: Savings without a Ceiling

The primary advantage of itemizing for dental implants is that you have no upper bound on the expenses you can deduct and no mechanism to reduce the amount of money you might save.  

In other words, consolidating your payments into a single tax year has no downside.

• You do not have to concern yourself with annual contribution limits as with an FSA or HSA (see below)
• There is no income-based phase-out to limit savings as with other deductions such as the Child Tax Credit

Itemizing Caveat: Two Floors that Limit Savings

Itemizing your dental implant deductions includes two floors that may reduce your tax savings. But don’t worry – consolidating your expenses into a single tax year offers the perfect strategy to clear these hurdles. 

Standard Deduction

The first floor is the standard deduction. The total of all itemized deductions must exceed this threshold for your dental implant expenses to yield any tax savings.

Therefore, consolidating expensive treatment into a single calendar year (January to December) increases your chances of passing this hurdle.

For instance, a hypothetical married couple with a $100,000 AGI (Adjusted Gross Income – IRS Form 1040 Line 11 for 2021) who pays for a $50,000 full-mouth restoration in a single tax year exceeds the $25,100 standard deduction – without counting donations, mortgage interest, or property taxes.

$50,000 – $7,500 ($100K * 7.5%) = $42,500

7.5% AGI Limitation

7.5% of AGI is the second floor. You do not begin saving money until all of your unreimbursed medical and dental expenses in a given year exceed this hurdle.

Now you have a second reason to consolidate payments to providers in a single calendar year – you only have to meet the threshold once! Research IRS Topic 502 for a comprehensive listing.

Qualified Medical & Dental Expenses

• Individual health & dental insurance premiums
• Unreimbursed expenses (after insurance pays claims)
  • Annual deductible
  • Amounts above the yearly maximum
  • Charges exceeding the allowed amount (out-of-network)
• Vision care (exams, eyeglasses, contact lenses, etc.)
• Auditory care (exams, hearing aids, etc.)
• Travel and lodging costs necessary for treatment
• Prescription medications, weight-loss & smoking cessation programs

Hidden Opportunities for Seniors

Seniors on Medicare needing dental implants should not overlook what they pay for Parts B (Medical), C (Advantage), D (Prescription Drugs), and supplemental plans.

Because most people over the age of 65 are retired, they cannot fund premiums via pre-tax payroll at work. But they can include Medicare premiums as an unreimbursed medical expense, moving them closer to meeting the 7.5% AGI hurdle.

Hidden Opportunities for the Uninsured

Uninsured patients needing replacement teeth might consider buying a plan in the individual marketplace even though most insurance companies exclude benefits via a missing tooth clause (exclusion for pre-existing conditions).

Free dental implant treatment typically goes to individuals with the financial capacity to pay for other work (unextracted teeth); dentists love filling their chairs with profitable patients. These programs work like free toasters for opening a checking account, where the banks give something away to attract new customers.

Plus, the premium costs bring you closer to the 7.5% AGI hurdle.

Itemizing Illustration

Consider this example for a hypothetical married couple (not retired) with a combined AGI of $100,000. They work in California and itemize their deductions on their federal and state income tax returns. Their marginal rate is 22% for federal and 9.3% for California.*

They have $50,000 in dental implant expenses (full-mouth restoration), which they can consolidate into one tax year or spread over multiple years.

* State rates and brackets vary, and not all states impose income taxes.

Single Tooth Implant Discounts: Flexible Spending Account

Healthcare Flexible Spending Accounts (FSA) are the second IRS dental implant discount plan. An FSA is ideal for patients needing a single tooth replaced because it offers higher percentage savings but includes contribution ceilings.

If available through your employer, an FSA enables you to use pre-tax dollars to pay for qualified medical and dental expenses. Of course, you must enroll before getting treatment.

FSA Hidden Feature

The hidden feature of an FSA is that it offers dental work financing for patients with bad credit history at 0% interest rates. Follow these simple steps to make it happen.

1. Elect to fund your FSA during your employer’s annual open enrollment (November & December are most common)
   1. If an employer offers the benefit to a class of employees, it must permit all employees in that category to participate
   2. Employers cannot check your credit report or consider your FICO or Vantage score
2. Schedule the first implant procedure step at the beginning of the plan year (typically January)
3. Your employer must reimburse qualifying expenses immediately – per IRS requirements
4. You have up to 52 weeks to repay the loan via pre-tax payroll deductions made during the plan year
   1. Your employer cannot impose origination fees (an upfront percentage of the loan) or charge interest for the use of their money – as private lenders typically do
   2. Better still, you repay the employer-loan using pre-tax dollars, which reduce the amount of your income subject to three types of taxes (see next section)

FSA Benefit: Higher % Savings

An FSA also provides the highest percentage of dental implant discounts because you avoid a third levy type and have no expense floors to surpass before the savings kick in.   

• Pre-tax deductions also reduce your exposure to FICA payroll taxes (employee share is 7.65% for incomes below $148,100)
• You realize savings even if you take the standard deduction
• The 7.5% AGI hurdle does not apply to pre-tax contributions

FSA Caveat: Contribution Ceiling

Annual contribution limits mean that an FSA has a spending ceiling. Therefore, they work best for patients who want a single dental implant or need to space treatment over several years to heal between procedure steps.

The Healthcare FSA annual contribution limits for 2021 are as follows:

• Individual employee: $2,750
• Married couple: $5,500

FSA Illustration

Consider this example for a hypothetical married couple (not retired) with a combined AGI of $100,000, who work in California, where both employers offer an FSA. In this case, they can realize the following benefits each year.

• Guaranteed-approval interest-free financing without a credit check
• Tax savings of $2,142 on $5,500 of expenses or 38.95% off list price
  • Federal: 22%
  • State: 9.3%*
  • FICA: 7.65%

* State rates and brackets vary, and not all states impose income taxes. Plus, NJ and PA do not recognize pre-tax deductions.

Maximum Dental Implant Discounts: Health Savings Account

Health Savings Accounts (HSA) are the third IRS dental implant discount plan. An HSA maximizes savings because you can combine higher percentage markdowns with a lofty expense ceiling.

An HSA is a tax-favored funding vehicle attached to a high-deductible health plan (HDHP), which must be in place before treatment begins.

HSA Hidden Feature

The hidden feature of an HSA is that as long as you establish an account before incurring a qualifying expense, you can pay yourself back later using tax-favored dollars, provided you continue with an HDHP. [2]  

In other words, there is a higher payment ceiling that is less likely to limit your savings. It just takes extra time because there are annual contribution limits (2022):

• Self-only: $3,650
• Family: $7,300
• Age 55 or older catch up: $1,000 (additional amount per person)

HSA Benefit: Supreme Overall Savings

The overall tax savings associated with an HSA are supreme because it combines the higher percentage discount of an FSA with nearly unlimited deductions as with people who itemize. You get the best of both worlds!

First, an HSA allows you to use pre-tax dollars to pay for qualified medical and dental expenses, just like an FSA. Therefore, your markdown percentage is better in three ways.

1. Reduce your exposure to FICA payroll taxes if available at work
2. Recognize savings even if you take the standard deduction
3. 7.5% AGI threshold for itemizers does not apply

Second, even though an HSA has annual contribution maximums, your spending level has a much higher ceiling because you can reimburse yourself in the future with low-cost tax-favored dollars. Keep receipts for your records!

HSA Caveat: Fewer Patients Qualify

The drawbacks to using an HSA to pay for dental implants are twofold: fewer patients qualify to participate, and some realize slightly lower percentage savings.

First, individuals in specific categories automatically do not qualify.

• Seniors and individuals with disabilities on Medicare
• Low-income families and pregnant women on Medicaid
• Tricare recipients (active-duty military, retirees, dependents, etc.)
• Anyone claimed as a tax dependent

Second, people who purchase their HDHP plan through the individual marketplace can deduct HSA contributions from their taxes. However, you lose the FICA savings associated with pre-tax payroll contributions at work.

HSA Illustration

Consider this example for a hypothetical married couple (not retired) with a combined AGI of $100,000 who work in California. At least one employer offers an HSA, and they choose a plan covering both spouses.

Implant Procedure	Average Cost	Savings (38.95%)	Years to Reimburse
Single Tooth	$3,500	$1,363	1
Upper or Lower Jaw	$25,000	$9,737	3.4
Full-Mouth	$50,000	$19,475	6.8

In this case, our couple reduces their costs by $38.95% while taking the standard deduction – even for the most expensive full-mouth restoration.

• Federal: 22%
• State: 9.3%
• FICA: 7.65%

Final Thoughts

Dental implant patients have three ways to utilize IRS-sanctioned programs to generate significant discounts. Cutting your costs by 22% to 39% could make a massive impact on your ability to afford to replace those missing teeth.  

Use the information outlined in this article to develop an action plan in consultation with your dentist and accountant. Who knew that our government was so willing to help you restore a confident, beautiful smile?

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Article Citations:

[1] IRS Publication Topic 502 Deductible Medical & Dental Expenses

[2] IRS Publication 969 Health Savings Accounts