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If your practice isn’t yet taking advantage of Section 179 of the United States tax code, there’s still time! Here are the four essential things you need to know to save your office (potentially) a lot of money before year’s end.
- What is Section 179?
Section 179 of the United States tax code allows companies that purchase equipment and technology to depreciate those fixed assets over their useful life. Essentially it’s an accounting method that matches the cost of acquiring an asset with the years the asset earns revenue. This includes equipment purchases like our Gemini® laser, VALO® curing light, and Endo-Eze™ Genius® endodontic motor system.
- What Benefits Does Section 179 Offer?
There are two important benefits to taking advantage of Section 179. First, it allows dentists to recover their original purchase cost of an equipment or technology item by allowing them to deduct the cost of the purchase in the year the dentist placed it into service or take non-cash depreciation deductions against revenue over the useful life of the asset. It also helps clinicians save money on taxes because depreciation expenses are tax deductible, which in turn lowers the practice’s taxable income. The lower the taxable income means more tax savings and greater profit.
- How Does Section 179 Work?
By depreciating asset expenses, dentists can recover the cost of their equipment technology purchase over the useful life of the asset. For example, with Ultradent’s two-year warranty of the VALO Cordless curing light, clinicians can annually deduct one-half of the cost of the curing light for two years.
- When Should Dentists Use Section 179?
Here are the rules clinicians must adhere to when filing for a tax break under Section 179: - Remember there is a time limit! The deduction is allowed ONLY in the year that the asset is placed into service, or, the year in which the equipment is ready for use, not the year in which the equipment is purchased.
- Many dentists want to know if equipment or technology they are leasing qualifies them to take advantage of Section 179. The answer is yes. Section 179 applies to personal property (equipment and technology) as well as potential leasehold improvements. This could be a great route for many practices, as the deduction may exceed total loan or lease payments they make on their equipment and technology per year.
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