As 2014 quickly approaches there are a number of generous tax incentives that are set to expire at the end of the year. While we don’t know what the future holds it’s certain that the governments need to generate additional tax income may spell the end of several lucrative tax deductions, credits and benefits. Perhaps the most important to dentist and dental practitioners is the extremely favorable equipment financing options. Under existing regulations, your practice can realize significant benefits if you enter into a financing agreement before 2014.
Under Section 179 of the IRS tax code, which has been modified several times since 9/11 and the recession, practices are allowed to deduct all or part of the purchase price of certain qualifying business purchases including equipment, technology and off-the-shelf software. The 2013 Section 179 deduction is $500,000, which begins to phase out at $2 million. In addition, there is a bonus depreciation deduction. The equipment must be in use by December 31, 2013.
This opportunity will be reduced if Congress decides to reduce this business equipment incentive for businesses, such as dental practices or laboratories. If that’s the case, on Jan. 1, 2014, the Section 179 deduction amount will go from the $500,000 limit this year back to the original cap of $25,000, with a phase out beginning at $200,000. Additionally, there will be no bonus depreciation utilization in 2014. So if practices wait to make an equipment, technology, or software purchase, they will lose a big tax deduction.
In addition to depreciation and tax benefits, there are other reasons to move quickly on equipment purchases.
- Faster ROI on new equipment and technology — any equipment or technology purchases that enhance profitability are easier to justify in this year’s favorable financial climate. Bringing equipment online sooner will also increase practice efficiency and effectiveness, which may result in incremental profitability, a higher level of quality care, and greater patient satisfaction.
- More favorable deferred financing — the interest rate environment is still low, which makes financing large purchases attractive.
- Eliminate downtime from outdated equipment —consider the loss of revenue, equipment downtime, and unhappy patients you may experience the next time an outdated piece of equipment breaks down. If it needs to be replaced, “sooner is better than later.”
Before making any purchases it’s essential to speak with a qualified accounting professional who can review your situation and provide customized advice for your specific situation. For additional information please contact Mark Foreman, CPA, at 952-948-1844, or click here to email Mark.
Edited with permission from DentistryIQ