Special Tax Incentive to support equipment upgrades

If you are a medical or veterinary provider considering purchasing new or upgrading your imaging equipment be sure to understand the section 179 deduction.

What is Section 179 and how does it benefit businesses?

This is a tax incentive that allows small businesses to write off the entire purchase price of qualifying equipment in the year it was purchased.  If a business bought a piece of equipment before Section 179, they would have had to write it off over its normal recovery period. For example, if a business purchased $100,000 in equipment that was depreciable over five years, they would only be allowed to write off $20,000 per year. This made it difficult for some businesses to purchase the equipment they needed. Now that same business can write off the entire $100,000 the same year the equipment was purchased.

What are the limits on the Section 179 tax deduction?

Under the rules from the Small Business Jobs Act of 2010, Section 179 allowed small businesses to deduct up to $500,000 in one year, but the rules have recently changed to raise the cap to $1 million. To be able to deduct the full amount, you can't spend more than $2.5 million in that tax year on qualified property. These caps are indexed each year for inflation since they were increased in 2018. In 2020, the amount that can be deducted is $1.04 million and the allowable amount spent is capped at $2.59 million.

  1. The purchase must be considered "qualified property." This means that it must be tangible, depreciable, and used in the active conduct of business.
  2. The property must be purchased and put into service in the year the deduction is made. This means any equipment purchases must also be installed. Simply buying something on December 31 does not allow you to use Section 179.

Common examples of qualified property are:

  • Imaging Equipment
  • Software
  • Heavy equipment.
  • Certain vehicles.
  • Machines/tools.
  • Tangible personal property.
  • Office equipment.
  • Office furniture.
  • Computers.
  • Certain improvements to qualified real property.

To be able to claim a Section 179 deduction, the business must have a taxable profit. In addition, a deduction can only be made up to the amount of taxable income. For example, if the business has a taxable profit of $50,000 before the Section 179 deduction and makes a qualifying purchase of $100,000, only $50,000 of the purchase is deductible in the first year.

To learn more for your business find a copy of the calculator at the attached link below.

https://www.section179.org/section_179_calculator/

Contact me to learn more about ways to utilize section 179 to support your healthcare needs at kevin.kuntz@ami-ii.com or 614-787-1440

Kevin Kuntz - Medical Sales Representative