makes a pretty good case for making you money. Therefore,
money makers are good debt.
To summarize, never buy anything just for the tax deduction.
Your purchases should either be to replace something that is
“broken” or will give you a return on investment (ROI). The tax
deduction will always be a bonus.
The New and Improved Tax Benefits
The Section 179 expensing election to immediately write off new
or used equipment purchases is now up to a $1,000,000 limit.
There are some income limitations on this election, but most
practices buying equipment have income they are trying to
reduce. Therefore, the 100% deduction on what would otherwise
be a capital asset is very favorable tax treatment.
There is also bonus depreciation to consider. Under the Tax Cuts
and Jobs Act, first year bonus depreciation got even better.
Bonus depreciation used to be a 50% expense and you depreci-
ated the remaining basis. It was also limited to new equipment
which is why we used 179 expensing on used assets.
Now the bonus depreciation is 100% and allowed on new and
used equipment. There is no limit to how much bonus depreci-
ation you can use! Bonus depreciation does not have an income
limitation. Therefore, bonus depreciation can create a loss or just
be a great tax write off. For example, if you buy a $100,000
worth of assets, you get an immediate write off. If you are in the
35% tax bracket, you just saved $35,000 in taxes. What if you
are a startup and don’t have any current taxable income? Good
news – that $100,000 of bonus depreciation can be carried for-
ward to cover future losses.
Both Section 179 and bonus depreciation allow 100 percent
write-off of the cost of the equipment in the first year. Both
require that the equipment must be put into use the year the pur-
chaser takes the deduction. For example, if you buy a cone beam
this year but it is not ready for patient use until 2019, you will
have to wait until filing your 2019 taxes before taking either 179
or bonus depreciation. But if you have it ready before Dec 31,
you can deduct it from the current year’s taxes.
The time to analyze your asset needs is now. Contact your den-
tal CPA to get insight into your specific situation. Find out how
your investment can add cash to your practice.
Catherine Lightfoot, CPA, CHBC serves as
Director of EEPB PC’s Healthcare Services
Practice. EEPB, PC is one of Houston’s
largest local accounting firms serving the
needs of Texas dentists. Send email to:
[email protected].
www.houstondentistrymagazine.com
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