If you have been waiting to purchase new digital equipment for your practice, now may the time to act. While panoramic imaging systems, CBCT, intraoral sensors, and CAD/CAM technology all pay for themselves thanks to improved communication and case acceptance, buying your equipment before the end of the year can also provide a number of tax benefits for you as a small business owner. *
The federal government has enacted tax deductions to help small businesses purchase capital equipment and spur economic growth. With Section 179, dental practice owners can write off a certain amount of their purchases upfront, rather than depreciating it over the useful life of the asset. However, this number is subject to change on an annual basis; in fact, as with last year, it was supposed to decrease to just $25,000. Fortunately, a bill calling for a one-year extension on the $500,000 write off was just passed. To ensure that you lock in the best deduction, you may want to look into purchasing your equipment this year, as this amount may decrease in 2015.
To highlight the deductions for which you may be eligible, I have created the following chart:
|Tax Credit||How It Works||Qualifying Purchases|
|Section 179 Deduction||· Write off up to $500,000 on 2014 capital purchases of $2 million
· Purchases must be made and put into service by December 31, 2014
·Phosphor plate systems
·Digital panoramic, cephalometric and cone beam CT systems
·Practice management software
|Bonus Depreciation||· Expansive benefit for businesses spending greater than $500,000 on new capital equipment in 2013
· Take a bonus 50% first year depreciation on equipment placed into service by December 31, 2013
· Also useful for businesses with a net loss in 2013, as this qualifies to carry-forward the bonus depreciation to a future year
|·Can only be used for new equipment—not used equipment or software|
So, how do these deductions work? Let’s say you purchase $150,000 worth of digital technology. Here’s one simplified view of how the numbers may break down:
|2013 Section 179 Deduction Write Off||$150,000|
|Tax Savings: ($150,000 x 33% tax rate)||$50,000|
|Equipment cost after Section 179: ($150,000 less all tax deductions)||$100,000|
In this particular instance, time is of the essence. The maximum Section 179 deduction is expected to decrease to just $25,000 in 2015,** so you may want to consider taking advantage of this year’s deduction before the deadline passes.
* Before making any major purchase decisions, please speak to your business accountant or financial advisor.
** This amount is subject to change.