Are you looking to invest in some advanced dental equipment for your practice, like an intraoral scanner or 3DPrinter? Then you should definitely know about Section 179 tax deductions, and how they can be used to lower your tax bill, free up cash flow, and make it easier to invest in the cutting-edge technology your patients have been asking about.
A Section 179 tax deduction lets a business or practice take a deduction for the cost of any qualifying purchase in the same tax year that you put it into service. This deduction is applied directly to your taxable income.
The Section 179 tax deduction is an alternative to classifying the equipment you use for your business as an asset, and then depreciating it over several years. By taking a Section 179 tax deduction, you can get a bigger tax benefit immediately. This frees up cash flow and may make it easier for you to reinvest in your dental practice. There are some situations where classifying your purchases as assets and depreciation may make more sense, such as when you take out a loan to buy equipment. But if you can pay for your equipment outright, a Section 179 tax deduction is usually the way to go.
The deduction limits change every year. But for the current 2022 tax year, there are limits for Section 179 deductions, such as:
• $2,700,000 equipment purchase limit
• $1,080,000 tax deduction limit
This means that you can either purchase $2.7 million in equipment, or take a total tax break of $1.08 million, whichever comes first. We recommend consulting with your tax advisor or at least review the IRS website for updated limits, as these limits rise every tax year.
Section 179 tax deductions include several improvements and equipment purchases qualify for a deduction, such as:
• Computers, servers, and dental/accounting software
• Equipment like chairs, x-ray machines and digital dental equipment
• Ventilation and HVAC systems
• Security systems
• Roofs
• Other Qualified Improvement Property (QIP)
The equipment and other things you purchase can also be pre-owned, not merely new equipment. The equipment must simply be “new to you” and your practice. You also must purchase the equipment and install or begin using it in the same tax year, with a cut-off date of December 31st.
For more information about Section 179 Tax Deductions, check out our Whip Mix blog here. Be sure to check with an IRS agent or your tax advisor for specifics of how these deductions might relate to your practices. Here is a link to the IRS reference to Section 179.