How to Take Advantage of the Section 179 Tax Deduction in 2021
If you own a dental practice, the Section 179 tax deduction may help you lower your taxable income and help you save on your business taxes for 2021. Learning more about this valuable tax incentive can help you reduce owed business equipment taxes and help you plan for your practice's future.
What is the Section 179 tax deduction?
The Section 179 deduction applies to tangible personal property such as machinery and equipment purchased or leased for use in a trade or business.
How does the Section 179 tax deduction work?
Any dental practice filing a U.S. Business Income Tax Return for 2021 is eligible to take the Section 179 deduction. The equipment must be acquired in 2021 and installed or placed in service by Dec. 31, 2021.
I recently bought new equipment. What more do I need to know about qualifying for Section 179?
Coordinate with your equipment provider to ensure there's enough lead time to install your equipment before the end-of-year deadline.
If your new equipment requires employee training, you will need to schedule the training as soon as possible to meet the deadline.
Keep in mind that if you pay for equipment in advance but fail to install it by Dec. 31, 2021, the Section 179 deduction will not apply for 2021. You may also need to meet other eligibility requirements under Section 179.
What kinds of equipment purchases qualify for the deduction?
Most of the equipment you'll purchase, finance, or lease for your practice will qualify for the deduction, provided that it is used more than 50% of the time for business purposes. A few examples of qualifying purchases include:
- Business vehicles
- Certain improvements to an existing non-residential building. Improvements may include fire alarms, HVAC, security systems, and roofing.
- Computer "off-the-shelf" software
- Equipment (machines, etc.) purchased for business use. (Your deduction is based on the percentage of time you use the equipment for business purposes).
- Office equipment (X-ray imaging instruments, handpieces, air purifiers, etc.)
- Office and operatory furniture (dental patient chairs, dental cabinets)
A routine part of an IRS audit is to review freight bills and bills of lading and to verify when the equipment was delivered and installed. Make sure you retain these documents in case of an audit.
Is there a limit on how much money I can deduct in 2021?
The Section 179 deduction limit for 2021 is $1,050,000. This means your dental practice can deduct the full cost of qualifying equipment (new or used, leased or owned), up to $1,050,000, from your taxable income in 2021.
The tax deduction applies until you reach a spending cap of $2,590,000 for the year. The spending cap was put into place to ensure that the deduction remains an incentive for small businesses.
Who should I contact to claim the tax deduction for dental practices?
If you have questions about Section 179, contact your CPA or tax professional. They can help you determine if taking the Section 179 deduction is the right choice for you and your practice. In addition, your tax professional may be familiar with other tax provisions that may provide additional tax savings.