When managing your day-to-day overhead, it can seem challenging to allocate spending to upgrade, enhance or expand your dental equipment. However, being strategic about when to purchase higher-dollar items can help you realize the most value. By filling your supply and equipment needs before the end of this year, you can categorize to your advantage before next year’s tax time and get your practice running at peak efficiency.
Alleviate pain points.
Perform an equipment performance audit by asking yourself and your team:
- How often are we having poor-performing equipment serviced or repaired? At what cost?
- What has been the cost of not being able to treat patients during equipment downtime?
- How much time have we lost due to lack of or ineffective tools?
- Do any of our current tools compromise our patients’ comfort?
To evaluate your return on investment in new equipment, it takes the full view of what your practice needs to achieve peak production. Ask these questions:
- What steps can we take to increase confidence in our equipment and decrease stress?
- Where would digital equipment streamline processes and save money over time?
- Have we missed potential revenue streams by not investing in new technology?
Acknowledge that value doesn’t always mean the lowest price. Securing durable equipment from authorized vendors means that it will likely have a longer lifetime. Trusted products that are well-designed and properly maintained generally have a lower cost per use.
Professional equipment that has a “useful life” of one year or more may be tax-deductible. Dental equipment and technology is usually depreciated over a period of five years; furniture and fixtures (including dental cabinets) over seven years —reducing taxable income each year. A dental practice can deduct up to $1 million in equipment purchases during 2019 as long as the total purchases of equipment during 2019 does not exceed $2.5 million.
The Tax Cuts and Jobs Act of 2017 provides an opportunity to maximize savings and tap into tax deductions sooner. Section 179 of the IRS tax code allows businesses to now deduct the full price of qualifying equipment and/or off-the-shelf software purchased during the tax year. That means that if you buy dental equipment and put it into service in 2019, you can deduct 100% of the purchase price from your reported 2019 gross income.
To manage your tax brackets and leverage deduction benefits, you could choose to use the Section 179 accelerated deduction for part of an equipment’s purchase price and depreciate the remainder over five years.
However, it’s important to know that you cannot use Section 179 deductions to lower your income below $0 and create a loss. This can prove to be a “trap” for dentists using S Corporations who do not have sufficient owner’s equity (basis) to realize the benefits of expensing equipment.
Through the year 2026, Section 168(k) also allows business owners to take an additional first year depreciation deduction in the placed-in-service year of qualified property. There are no dollar limits, and you can create losses if you desire. But, S Corporations do have the same basis limitations related to losses.
There are, of course, complexities and limitations to claiming deductions. And different practices and different dentists’ spending habits will yield different results. A dentistry-speciﬁc CPA can provide in-depth expertise on the many important tax considerations associated with purchasing large equipment or renovating your office.
Stock up for success in 2020.
When it is time to buy, know that there are resources to help members of organized dentistry secure the best deals. Through The Dentists Supply Company, association members benefit from negotiated discounts and free shipping on an expansive online catalog from authorized vendors.
Don’t delay in purchasing items that can improve your practice’s total productivity. Explore, compare and save at TDSC.com. For assistance getting your practice set up to shop, call 888.253.1223 or email email@example.com.
TDSC and its affiliates do not provide legal, accounting or tax advice. This material is for general informational purposes only and is not intended to provide, and should not be relied on for, legal, accounting or tax advice. Please consult your own legal, accounting and tax advisors if you have questions specific to your situation.