Cost · 9 min read
Your rent is fixed for the length of your lease. So when this ratio moves, production moved.
In the only measured national data that exists, dental practice rent runs about 4% of receipts, and rent plus utilities plus repairs runs about 6.5%. That is the honest answer, and the next part matters more: no credible body publishes a dental occupancy benchmark against production, and the ranges you have seen quoted do not have a source.
We went looking for one, properly, because we were about to publish a range ourselves. What we found instead is a closed loop of articles citing each other with no origin, and one genuinely measured figure that almost nobody uses. So here is the measured number and exactly what it covers, what belongs in occupancy in the first place, and the reason your occupancy percentage is not really telling you about rent at all.
The IRS publishes Statistics of Income for sole proprietorships broken out by industry, and Offices of Dentists is its own column. It is built from filed tax returns rather than from a questionnaire, so the figures are what dentists actually deducted rather than what they remembered. The IRS still draws a sample and publishes estimates from it. But the underlying numbers went to the government under penalty of perjury, and that is a different quality of number than a survey response. Three consecutive years:
| Tax year | Rent | Utilities | Repairs | Combined |
| 2021 | 4.47% | 1.47% | 1.11% | 7.05% |
| 2022 | 4.40% | 1.45% | 1.03% | 6.88% |
| 2023 | 3.98% | 1.43% | 1.06% | 6.48% |
Source: IRS Statistics of Income, Nonfarm Sole Proprietorship Returns, Table 2, Offices of Dentists. The 2023 column covers 56,157 returns.
Two things about that data before you use it, because they are the difference between a real benchmark and a borrowed one.
The denominator is business receipts, which on a cash basis is close to collections. It is not net production, and net production is the base every other ratio we publish uses. Do not compare this to a production-based target without saying what changed.
It is sole proprietorships only. Average receipts per return in 2023 were $319,670. The ADA's average general practice owner, solo and group together, bills $965,660, and billings sit before write-offs while receipts sit after, so the real size gap is wider than the three to one it looks. S corporations are excluded entirely, and that is where most established practices live. Read this as the small end of the profession, measured accurately, rather than as the profession.
This is worth knowing because it tells you how much weight to put on anything you read next.
The ADA's Survey of Dental Practice reports total practice expenses and does not break them into categories, so there is no occupancy line in it. The Dental Economics and Levin Group annual practice survey reports overhead in aggregate and does not break out occupancy either. The joint benchmarking report from the Academy of Dental CPAs and the National Society of Certified Healthcare Business Consultants is where our other bands come from, and it is the best line-item instrument in dentistry, but it carries no occupancy figure we can point you to and the data itself is behind a paywall.
Everything else currently ranking for this question traces back to other articles rather than to data. We are not going to add to that pile. Where we have a sourced figure we will give you the source and the denominator, and where we do not have one we will say so.
You can still benchmark the lines that are sourced, and occupancy is not the one that will move your practice anyway. Our free Dental Practice Benchmark Scorecard covers those in about two minutes.
There is no dental-specific standard, so this is a decision your books make rather than one you look up. The defensible approach is to anchor it to the lines that already exist on a tax return, because those are uniform across every practice and every preparer, which makes your number reconcilable later.
In: base rent, common area maintenance, property tax passed through by the landlord, utilities, repairs and maintenance, janitorial.
Out: equipment rent, which is its own line and a small one, running 0.25% of receipts in 2023, down from 0.45% two years earlier. Mortgage interest. Depreciation. Those are financing and asset costs, not the cost of occupying space.
Two lines cannot be cleanly split, and any published occupancy figure claiming otherwise is estimating. Insurance bundles malpractice and general liability with coverage on the space. Taxes paid bundles employer payroll tax with real property tax. Neither separates on a return.
And if you are on a triple net lease, common area maintenance and property tax arrive as pass-throughs that different bookkeepers code differently, some inside rent and some on their own line. That is the practical reason two identical practices report occupancy percentages a point apart. Pick one treatment, write it into the chart of accounts, and never change it mid-year.
When the practice pays rent to an entity you also own, the rent is not a market price. It is a number you chose, and it usually got chosen for tax reasons.
The distortion does not run in a predictable direction, which is what makes it dangerous. Setting rent high moves income out of the practice and makes the practice look expensive to run. Setting it low or skipping it entirely flatters practice profitability, and if you ever sell, it inflates the earnings a buyer is pricing off a number that will not survive the transition.
So set the rent at a defensible market rate and write down how you got there on the day you set it, not two years later when someone asks. That one habit is the whole control.
It matters because the rules were built with this exact arrangement in mind. The rent deduction under Section 162(a)(3) is written for property the taxpayer has no equity in, which is why related party rent draws attention at all, and the self rental rules treat the income from renting to your own operating business differently from the losses. Rent above market can be recast as something other than rent. Your preparer owns those specifics. What you own is the number and the file that explains it, and the entity structure is the same conversation, so if you are still deciding how the entities sit, that is a structure question before it is a rent question.
Here is the part that changes how you read the number.
The ADA publishes a starting point sizing formula for dental offices: operatories multiplied by the square footage of an operatory, divided by 0.275, which implies treatment rooms are a bit over a quarter of a finished practice. Take 110 square feet per operatory, which is a 10 foot by 11 foot room. Four operatories works out to exactly 1,600 square feet, or about 400 square feet of total space for every chair.
Now put a practice in that space paying $40,000 a year in rent, and run the identical lease against two different billing levels from the ADA survey. Both are gross billings, fees charged before write-offs, so this is a third base again and not net production:
Same building. Same lease. Same landlord. Same rent to the dollar. The ratio moved by two thirds, and rent had nothing to do with it.
Now extend that to your own month to month. Your rent is contractually fixed for the length of your lease. It does not respond to a slow February or a strong October. Which means that essentially every movement you will ever see in your occupancy percentage is the denominator moving, whichever base you use, and not rent moving. Occupancy percentage is a production per square foot metric wearing a rent label. If yours is climbing, you have a production question, and the schedule is where the answer is.
Read it on a trailing 12 months, not a month, for the same reason you read every other ratio that way. Compare it to your own history rather than to a benchmark that does not exist. And treat a rising number as a prompt to look at production first, because that is almost always what moved.
There is exactly one moment when this ratio genuinely is about rent, and that is lease renewal. Walk into that conversation with your production per square foot and your trailing occupancy percentage in hand, because those two figures tell you what the space is worth to you, which is the only number that should set your walk away point. Occupancy belongs on the practice scorecard for that reason, not because it is a lever you can pull each month.
P.S. Reciprocity Accounting codes occupancy the same way every month, pass-throughs included, so a change in your ratio means something changed in the practice rather than in the bookkeeping. See how we can help your practice.
The only measured national figure is the IRS Statistics of Income series, which puts rent at 3.98% to 4.47% of business receipts for dental sole proprietorships across 2021 to 2023, and rent plus utilities plus repairs at 6.48% to 7.05%. Those are receipts, close to collections, not net production, and they cover sole proprietorships rather than S corporations. Any tighter range you have seen stated against production does not have a published source.
Base rent, common area maintenance, property tax passed through by the landlord, utilities, repairs and maintenance, and janitorial. Equipment rent, mortgage interest, and depreciation are excluded, since they are financing and asset costs rather than the cost of occupying space. Insurance and taxes paid cannot be cleanly split between the space and the practice on a tax return, so a figure that claims to include them is an estimate.
Usually not, and there are only three ways it can have. An annual escalator written into the lease, a common area maintenance reconciliation truing up last year's estimate, or a property tax reassessment passed through by the landlord. All three are once a year events and all three are visible in the lease before they hit. If none of them landed this period, the numerator did not move, which means the denominator did, and the question is about production.
Defensible means you could hand the file to someone else and they would land on the same number. In practice that is two or three dated comparable quotes for similar clinical space in your market, kept with the lease and revisited at renewal. The failure is almost never the rate itself. It is that the rate was set years ago for a reason nobody wrote down, and by the time it matters the person who set it is reconstructing an argument instead of pointing at a file. Your preparer owns the tax treatment. The documentation is yours.
The ADA publishes a starting point formula: operatories multiplied by the square footage of an operatory, divided by 0.275, which implies treatment rooms are a bit over a quarter of the finished space. At 110 square feet per operatory, a 10 foot by 11 foot room, a four operatory practice works out to 1,600 square feet, or roughly 400 square feet of total space per chair.