Section 179 Tax Deduction for Dental Practices
Looking to invest in some fancy new equipment for your practice, like laser dentistry tools or a CBCT scanner? Then you should definitely know about Section 179 tax deductions, and how they can be used to lower your tax bill, free up cash flow, and make it easier to invest in the cutting-edge technology your patients want. Read on, and get all the details in this blog from our team of dentist CPAs at Tooth & Coin.
What Is A Section 179 Tax Deduction? Explaining The Basics
A Section 179 tax deduction lets you take a deduction for the cost of any qualifying purchase in the same tax year that you put it into service. This deduction is applied directly to your taxable income. What does that mean?
Let’s say you buy a new CBCT x-ray machine in 2022, and you pay $100,000. You can deduct the entire cost of the machine on your 2022 taxes. If you’re being taxed at a rate of 38%, that means you’ll get a $38,000 tax break. Effectively, this reduces the cost of the machine to just $62,000.
The Section 179 tax deduction is an alternative to classifying your equipment as an asset, and depreciating it over several years. By taking a Section 179 tax deduction, you can get a bigger tax benefit right away. This frees up cash flow, and may make it easier for you to invest in your dental practice.
There are some situations where classifying your purchases as assets and depreciation may make more sense, such as when you take out a loan to buy equipment. But if you can pay for it outright, a Section 179 tax deduction is usually the way to go.
How Much Can I Deduct With Section 179? Understanding Limits & Restrictions
The deduction limits change every year. But for the current year of 2022, the limits for Section 179 deductions are as follows:
$2,700,000 equipment purchase limit
$1,080,000 tax deduction limit
This means that you can either purchase $2.7 million in equipment, or take a total tax break of $1.08 million, whichever comes first. We recommend checking the IRS website for updated limits, since these limits rise every tax year.
What Qualifies For A Section 179 Tax Deduction At My Dental Practice?
The best part about Section 179 tax deductions is that tons of improvements and equipment purchases qualify for a deduction. These include:
- Equipment like chairs, x-ray machines, laser dental tools, and other such equipment
- Computers, servers, and dental/accounting software
- Ventilation and HVAC systems
- Security systems
- Other Qualified Improvement Property (QIP)
The equipment and other things you purchase can be either new or pre-owned, too. They simply must be “new to you” and your practice. You also must purchase the equipment and install or begin using it in the same tax year, with a cut-off date of December 31st.
Ready To Optimize Your Tax Strategy? Contact Tooth & Coin Today!
Section 179 deductions are just one of the tax strategies you can use to free up cash flow, pay less in taxes, and improve your dental office. At Tooth & Coin, tax advice for dental practices is our specialty. If you’re ready to start saving more on your tax bill, schedule an appointment with Jonathan VanHorn online, or give us a call at (877) 265-2121.