It’s that time of year again! Yes, the stores are filling with Halloween, Thanksgiving, and Christmas merchandise – but that’s not what we’re talking about. For dental specialists, it’s time to start thinking about your taxes. Will you take advantage of your Section 179 deduction for 2019? Do you know the ins-and-outs of Section 179? What types of dental equipment purchases may be deducted from your taxable income, anyway?
We put together a brief guide to the basics of Section 179 tax deductions. Read on, and learn how this small-business tax incentive can help orthodontists, pediatric dentists, oral surgeons, endodontists, and other dental specialists make the most of their 2019 budgets.
What is Section 179?
The Internal Revenue Service Code Section 179 deduction allows small business owners filing taxes in the U.S. for 2019 – including dentists and dental specialists – to deduct the cost of purchasing or financing qualifying equipment and/or software that was put into service within this tax year. This means that the full cost of dental equipment purchases, up to $1,000,000, may be deducted from your taxable income – so long as they were installed before December 31, 2019. Additionally, the Tax Cuts and Jobs Act has updated the Bonus Depreciation for eligible purchases to 100%.
What kinds of dental specialty equipment are eligible for Section 179 deductions?
In an interview released by the ADA, certified public accountant and president of the Academy of Dental CPAs, Allen M. Schiff, writes: “You can use Section 179 with a dental chair and unit, digital X-ray, computer software, computers, etc. This equipment also applies towards the Bonus Depreciation deduction.” Consult your CPA or financial advisor for more specific advice about your qualifying purchases.
How do you know if your practice qualifies for the Section 179 deduction?
The 2019 spending cap on equipment purchases is $2,500,000. If your practice has spent greater than this amount on qualifying equipment and software, you will be ineligible for the Section 179 deduction. The spending cap is in place to ensure that the deduction remains an incentive exclusively for small businesses.
What should I consider when purchasing dental equipment before the end of the 2019 tax year?
Making large purchases for your practice is exciting—after all, investing in the latest technology can significantly boost your workplace efficiency and safety. For this reason, you should exercise best judgment and consult with your financial advisor when purchasing new equipment. Your financial advisor can keep you up-to-date with IRS codes and suggest the right time to buy. An example of upcoming tax law changes: as of January 1, 2020, the Medical Device Excise Tax will go into effect once again, potentially affecting the final costs of your equipment.
In addition to maximizing your 2019 budget, consider the long-term value of your equipment purchases: Is your current dental operatory due for an update or are you building out your first practice? As you weigh your options, are you choosing durable equipment that will provide many years of value? Can your new equipment be personalized to meet the aesthetic, functional, and spatial requirements of your unique practice? You should ask yourself these questions any time you choose new equipment for your practice – but especially when you decide to combine long-term value with tax-year savings.
Is there a cut-off for Section 179 deduction eligibility in 2019?
Yes. Equipment and software purchases are eligible only when purchased and put into service by December 31, 2019. Consult with your equipment provider to ensure enough lead time, so that your equipment may be installed prior to the 2019 deadline.