No one wants to think about taxes more than they have to, but the end of the year is when using tax codes like Section 179 can help you save money by spending money. Medical practices require a lot of expensive equipment, which can burden its budget, especially smaller clinics and hospitals. However, investing in reliable medical equipment is necessary to continue providing quality patient care and remain an efficient business.
As we near the end of the year, we at JEM encourage our clients to look for ways to reduce the taxes they will owe in April. When hospitals, clinics, and physician’s offices can save on taxes, they can re-invest that money and grow their business.
IRS Tax Code Section 179 is a highly profitable tax write-off that incentivizes significant spending at the end of the year. It’s the perfect way for a medical provider to use any remaining money in their budget and save on high-cost equipment purchases. And the best part is that you can leverage financing your equipment to potentially receive more money in deductions than the cash outlay of the equipment!
WHAT IS SECTION 179?
Section 179 is a tax deduction for small to medium businesses, including medical practices, to deduct the total cost of qualified equipment and software purchased during the tax year. Without Section 179, the equipment cost is deducted from your taxes over several years as it depreciates. This tax code is ideal for quick relief from taxes after significant expenses, such as the enormous start-up costs of a new practice or massive upgrades to aging medical equipment in a hospital. For instance, if a clinic bought or financed $50,000 of equipment in 2023, they can deduct the entire $50,000 from their taxable income for 2023 rather than reporting it yearly as the equipment ages.
PROPERTY ELIGIBLE FOR SECTION 179
Most medical equipment would qualify for this tax write-off, but it covers even more. Qualifying property for IRS Tax Code Section 179 includes:
- Equipment purchased for business use
- Computers
- Software that is available to the general public and hasn’t been custom-built (also known as “off-the-shelf” software)
- Office furniture or equipment
- Most work vehicles that can’t double as a personal vehicle, such as forklifts and trailers
Did your hospital spend a bundle on a computerized inventory management system? Did you move into a new building and spend a lot of money on furniture? Did you replace all of your aging defibrillators with a newer model? All these things could be eligible for a tax write-off under Section 179!
LIMITATIONS TO SECTION 179
The IRS sets a few limits to this tax code, which can change yearly. For the tax year 2023, the maximum amount to be deducted is $1,160,000. Also, the maximum amount of qualifying equipment that can be purchased for the 2023 tax year is $2,890,000; after you reach that cap, your deduction will be reduced. The ideal candidates for this deduction are small to medium organizations that will be well within these limitations.
Another important factor of this tax code is that your equipment must be purchased and “in service” before December 31st of that calendar year to qualify for a deduction. Thankfully JEM has ready-to-ship equipment if you want to take advantage of this profitable tax code, but you have to act fast!
For more information on the exact instructions for filing for IRS Tax Code Section 179, see their official filing instructions for Form 4562 for Depreciation and Amortization.
SECTION 179 AND FINANCED EQUIPMENT
One of the most attractive advantages of using Section 179 is that you can include financed equipment under this section. You do not need to pay off your equipment before you can write them off on your taxes. Sometimes, the tax savings you receive from this tax code will result in more deductions than you paid for the equipment in 2023.
There is still plenty of time to take advantage of Tax Code Section 179. If you have financed your business’s medical equipment this year with JEM, speak to your accountant or financial advisors about filing for this deduction. If you have money that needs to be spent by the end of the year, consider maximizing your budget’s impact by financing with JEM. JEM offers easy financing options for most of the industry’s most popular medical equipment. That equipment you finance may be eligible for a Section 179 tax deduction.
We recommend contacting your financial advisor or tax consultant for more specific questions regarding Section 179 financing deduction. They will always have the most up-to-date information about structuring your financing options to maximize your deduction for your industry and region. Our customer service representatives at JEM would be happy to take your call if you wish to utilize Section 179 as you finance equipment at the end of the year. Email us at support@jemfinancing.com or give us a call today at 833-791-2551