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If youâ€™ve upgraded your practice this year, the Section 179 Tax Deduction will help boost your bottom line and allow you to move with confidence into the new year.
When you start to look at how much you're paying just in taxes, it can certainly be disheartening. However, the benefits of the Section 179 tax deduction will help alleviate some tax headaches.
The end of 2018 is in sight and 2019 is beginning to peek over the horizon, but along with the new year also comes a new set of expenses to go through in order to properly file your taxes. Your personal taxes are probably a big enough headache but managing your practice’s taxes doesn’t have to be a slog too.
If you’ve already made any upgrades or expansions to your office, or are planning to make any before the end of the year, you could be entitled to a significant tax break under the Section 179 deduction. Here’s how it works.
In December 2017, the Tax Cuts and Jobs Act was signed into law, allowing small business owners to take an increased deduction for upgrades made to their office. This includes your dental practice, and it allows you to deduct up to one million dollars on the equipment you purchased within the calendar year.
Section 179 is designed as an incentive for you to invest in your practice and grow your business. For all of the qualifying equipment you buy or lease, you get to deduct the full purchase price from your gross income. If you elect to take Section 179, the full price of your equipment will be taken up front and not written off over time, like most practices do for their equipment.
Section 179 can also be taken on each individual item and not all of your equipment in one calendar year, unless you elect to fill out the form for each piece of equipment. On the other hand, you don’t have to use it at all. It’s up to you — you get to pick and choose the items to apply it to that make the most sense for your financial plan.
A tax deduction for new equipment is useless if the equipment you purchased doesn’t even qualify. Fortunately, the list of qualifying equipment under Section 179 is very broad and doesn’t require you to jump through many hoops.
Some items include computers, office furniture, improvements to your building like alarms and security systems, equipment for business use, and basic software like Microsoft Office applications.
The Section 179 deduction does have one major caveat, and that is you can only spend a maximum of $2.5 million on equipment purchases before the deduction is reduced. However, this is a wide cap for most small practices, and up to this amount you will still be able to deduct the price of your equipment purchase in full.
For instance, a $35,000-dollar equipment purchase will lead to a true cost of $22,750 dollars after tax. That’s a total of $12,250 savings on your purchase.
If all those cash incentives weren’t enough to gain your interest, then consider this: Section 179’s benefits are only guaranteed for 2018, so don’t wait till next year to elect to take it — it might not be around.