What's the Big Deal About Year End Tax Savings?
Now is about the time you will see a flurry of emails promising “Year End Tax Savings”, urging you to purchase equipment for your practice.
The main savings is based on a provision called “Section 179″.
Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year.
That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income.
It’s an incentive created by the U.S. government to encourage businesses to buy equipment and invest in themselve
Bottom line, your tax savings for purchasing equipment in 2021 equates to about one third of the original cost.
The example below is the full purchase price of an Optopol PTS 2000 projection perimeter from a website called “Section 179.org”.
In this case above, almost $8,000 off of a purchase of $22,000. That is significant and worthy of a conversation with your CPA.
What is the sense of urgency? Why now and not next year?
Great question and one you need to consider.
First, the main thing about spending is the question of needing to replace or add equipment. What will it do for my practice? What is the danger of keeping older equipment for another year in terms of maintenance costs and downtime? Is the new equipment faster and have features that will enhance my patient care and make me more efficient? Don’t purchase something you do not need to keep from paying taxes, there are other ways to do this.
Second, take into consideration our escalating inflation rate, which soared to 6.2% in October of this year. Pricing for capital equipment will most likely increase in 2022 due to the supply shortage and higher costs for manufacturers. We have not had to think about this for many years now, but prices are likely going up
How do I qualify?
The other critical factor for 2021 tax savings is timing, in the past, orders in late November and early December meant that you would have no problem getting your equipment before year-end.
This year, not so much. Supply chain issues are hitting the industry hard and for many devices in eye care, it is already too late. If your accountant tells you that a capital equipment investment makes sense for this year, ACT NOW to have any chance of getting this equipment in prior to year-end. Remember, Section 179 states that the equipment has to be “placed into service” in your practice in 2021.
The bottom line is that if you need the tax write off and the equipment, do it soon. As always, speak to your CPA to see what your particular situation is and invest in equipment that makes sense in terms of initial cost, warranty, cost to maintain over time and value to your practice.
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