Emmott on Technology: With Equipment Tax Breaks Shrinking and New Taxes Looming, Now is the Time to Invest in New Technology

Emmott on Technology: A Technology Shopping List to Maximize Year End Tax Benefits
Thursday, November 08, 2012

The federal government wants you to buy some new technology before the end of the year.

There are two tax issues that make buying new technology this year a better deal than buying in 2013; the first is section 179 and the second is an impending new tax on medical devices.

Section 179 is not the secret desert location where the government hides crashed alien spaceships. It is a provision of the tax act that allows business owners, such as dentists, to expense a capital purchase in the same year it is purchased rather than depreciating the expense over the lifetime of the device. I am not even remotely a tax professional. Do not take this as professional advice blah, blah, blah. Nevertheless, it is generally agreed that in many cases section 179 can save dentists a considerable amount in taxes.

Currently the 179 provision allows you to expense up to $139,000—down from $500,000 in2011. The deduction will decrease to just $25,000 next year, 2013. Clearly if you are considering a technology purchase such as a CAD/CAM system, CBCT, or an updated server and network, you are better off doing it this year than next.

Also there is a new tax in the PPACA (More commonly known as Obamacare) bill that begins in 2013 adding a 2.3% excise tax on medical device manufacturers. That means that if you buy an x-ray sensor or any of the numerous other items classified by the FDA as a medical device, it will cost more in 2013 than it will in 2012.

Clearly Uncle Sam wants to you to buy some stuff, so what should you get? The following are some technology items that you should consider in order of importance. If you already have one then consider the next one on the list.

Computer Network: A powerful server networked to computers in all the treatment rooms, the front desk the doctor’s office, and anywhere else you need access to patient information.

Digital Radiography: Once the infrastructure is in place—meaning good practice management software and the network to support it—add on a solid state sensor based digital radiography system.

Digital Panoramic: A digital panoramic x-ray machine will improve patient care and make you money the first day it is installed. However, Cone Beam CT machines such as the i-Cat will undoubtedly dominate in the future, and if you do surgery or place implants you should consider a CBCT today instead of a traditional pano.

CAD/CAM: New digital impression cameras such as Sirona’s CEREC Omnicam and 3M ESPE’s 3M True Definition can be used to capture an impression for the lab or to transfer to a milling machine for in-office, while-you-wait crowns. The impression technology is now set up for future expansion which means you can get started with less expense and risk, by just taking digital impressions now and easily upgrading to full CAD/CAM in the future.

Cubex: This interesting device is a solution to a problem you may not even know you have. Cubex is a digital solution to supply management and inventory control.

There are other technology items that I believe a dental office should invest in such as an up to date interactive website and cloud based e-services. However these are not equipment and do not qualify for 179, so it is important to make sure your tax saving investment will actually qualify for the tax break. With that in mind, it’s a good idea to talk to your accountant prior to making these purchases to maximize the tax benefits available to your practice.

The future is coming and it will be amazing!

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