Monday, December 9, 2013
Year end is the time we traditionally evaluate our past performance and plan for the coming year. It is also the time of year dentists scramble to take advantage of tax breaks. This year is no different.
The federal government has extended and expanded section 179 for 2013. You can deduct up to $500,000 for equipment purchased and installed in 2013. You can even use the deduction retroactively for equipment purchased in 2012. Plus the law allows for first year 50% bonus depreciation.
Clearly Uncle Sam wants you to buy some new technology.
Once again the usual disclaimers apply. I am not a CPA, individual circumstances will vary, and you need to consult with your tax professional before making any investment or tax planning decisions.
Last year the 179 deduction was $139,000 and we were advised that it would drop to just $25,000 for 2013 and the bonus depreciation would be eliminated. Happily Congress changed their mind and upped the maximum back to $500,000 the same as it was in 2010 and 2011.
Section 179 applies to the purchase of most new and used capital equipment and some types of software. It may even apply to lease expenses. The bonus depreciation is just for new equipment, no used stuff or software. The deductions can be used to offset profits but not to generate a loss. There are additional rules having to do with qualifying capitol expenses and ceilings that are best left to your CPA to explain.
The bottom line is that if you are considering a major high tech purchase doing it now before the end of the year could save you some big bucks.
The two biggest of big buck items in dentistry are CAD/CAM and Cone Beam CT. A complete CAD/CAM system such as CEREC or E4D with the camera/scanner, computer, software and milling unit costs about $100,000 - $120,000. A cone beam x-ray system can be in a similar price range. Depending on the size and options, it will be between $100,000 and $150,000.
However you do not need to be making one of these huge investments to take advantage of 179. Consider the following more conventional purchases before year end.
If you are still putting off networking your entire office do it now.
4 Treatment Rooms @ $2,000 eaach: $8,000
2 Business @ $1,000 each: $2,000
Doctor’s Office: $1,800
Network and Setup: $3,500
Consultation Room: $1,500
Tablet: $600 each
Even if you have an existing network you should replace any computer in your office running on Windows XP before Microsoft ceases all support on April 8, 2014. If you do it now you get the tax benefit.
Advanced Cone Beams are amazing, but many dentists are still putting off buying a basic digital radiography sensor. One of the reasons is the mistaken belief that digital radiography will cost the practice $40,000 or more. That simply is not true. A solid state corded sensor and software will cost from $9,000 to $15,000.
The reason that dentists imagine digital radiography to cost so much more is they often include the cost of the network and assume they will need two or three sensors. The computer network is a separate investment from digital radiography, as it will support so many more functions in addition to radiography. And despite what the vendors may tell you, the great majority of offices can function well with one sensor. Try it, if I am wrong they will gladly sell you another one later on.
There is little doubt that we will have more technology in our future not less. Plan on it and let Uncle Sam help you pay for it. The future is coming and it will be amazing!