As the year draws to a close we traditionally evaluate our performance this year and plan for next year. It is also the time of year when practices scramble to take advantage of tax breaks, and this year is no different.
At the start of 2013 the federal government extended and expanded section 179 of the tax code. This is the section covering tax deduction for the purchase of business technology and equipment. Under the rules for this year you can deduct up to $500,000 for equipment purchased and installed in 2013. You can even use the deduction retroactively for equipment purchased in 2012, and the law allows for first year 50% bonus depreciation.
Clearly Uncle Sam wants you to buy some new technology.
While I’m happy to share this advice I’ve collected based on my discussions with several accountants, I do so with the usual disclaimers that I am not a CPA, individual circumstances will vary, and you should consult with your tax professional before making any investment or tax planning decisions.
Last year the 179 deduction was $139,000. A year ago we were advised that it would drop to just $25,000 for 2013 and the bonus depreciation would be eliminated. Happily, Congress changed their minds and increased the maximum deduction to the $500,000 level it was set at in 2010 and 2011. The section 179 deduction limits for 2014 might stay this high, or they could drop and we likely will not know until early next when, when it will be too late to take advantage of the high limit for 2013.
The section 179 deduction applies to the purchase of most new and used capital equipment and some types of software. It may even apply to lease expenses. The bonus depreciation is just for new equipment, no used stuff or software. The deductions can be used to offset profits but not to generate a loss. There are additional rules having to do with qualifying capitol expenses and ceilings that are best left to your CPA to explain.
The deduction could apply to an investment in a new clinical technology or new computers for your practice. Even if you have an existing computer network you should replace any computer in your office running on Windows XP before Microsoft ceases all support on April 8, 2014. If you do this upgrade before the end of the year, you can take advantage of the section 179 tax benefits.
The bottom line is that if you are considering a major high tech purchase, doing it now before the end of the year could save you some big bucks.