Section 179 of the U.S. Internal Revenue Code allows a taxpayer to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year rather than requiring the cost of the property to be capitalized and depreciated. Equipment and software purchased for a medical practice, such as radiology equipment, is no exception.
In the past, when your practice bought qualifying equipment, it could only write off a little at a time through depreciation. In other words, using a rough example, if you spent $100,000 on a machine, you would be able to write off (say) $20,000 a year for five years.
Now, if you buy or lease a piece of qualifying equipment, such as an X-ray machine, you may be able to deduct the entire purchase price from your gross income. Under the new law, the government increased the maximum deduction from $500,000 to $1 million and changed the phase-out threshold from $2 million to $2.5 million.
There’s more good news for physicians who own their buildings—the new law also expands the definition of Section 179 property to include the following improvements made to nonresidential real property after the date when the property was first placed in service:
- Qualified improvement property, which means any improvement to a building’s interior. Improvements do not qualify if they are attributable to:
- the enlargement of the building,
- any elevator or escalator, or
- the internal structural framework of the building.
- Roofs, HVAC, fire protection systems, alarm systems and security systems
These changes apply to property placed in service in taxable years beginning after Dec. 31, 2017. Watch for our upcoming e-book, Tax Reform Implications for Medical Practitioners, where we will cover the following topics:
- Tax Brackets and Standard Deductions
- Which Entity Makes Sense for Your Practice?
- Key Individual Provisions Affecting Physicians
- Bonus Depreciation
- How Will Policy Shape the Future of the Medical Profession?
Have questions about increasing profitability in your medical practice? Contact the Medical CPA team at Goldin Peiser & Peiser. You may contact Erick Cutler at 214-635-2541 or by using the contact form below. You may also visit his Google+ profile or connect with him on LinkedIn.
Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.