by Mike Reilly
For you to reap these tax benefits, your lease or loan agreement must be properly structured. So talk with your CPA before entering into any such agreement.
Make it Strictly Business
The bottom line is that, whether you are getting new equipment, adding a partner, expanding your office space or selling your practice, you’re making a business decision. And you do not want the seemingly thrifty choices you make today to wind up costing you an arm and a leg tomorrow. Because the variables associated with both leasing and buying are vast, consult your financial advisor on which is best for you?
Consider Tax Law Changes
For 2013, you can write-off the full price of equipment (new or used) you buy and place in service in 2013 up to $500,000, under the Internal Revenue Code Section 179 expensing election. You make this election on your 2013 tax return. Therefore, for 2013, this election can be made up until the due date for filing your tax returns which can be September 15, 2014 (for corporations and partnerships) or October 15, 2014 (for individuals) if you filed for an extension. For 2014, this limit has been reduced to $25,000. However, currently, there are proposals in Congress to extend the $500,000 limit through 2014.
For 2013, the amount you can expense is phased out on a dollar-for-dollar basis when your total investment in qualifying property during the year exceeds $2,000,000. Absent an extension of this phase-out provision, this phase-out limit will be reduced to $200,000 in 2014. Due to these generous phase-out thresholds, there is not much concern here for most medical practices.
For 2013, you can also take a first-year depreciation deduction equal to 100% of the purchase cost for most new (not used) equipment and off-the-shelf software purchased and placed in service in 2013. So that means that, even if you cannot expense a purchase (or you can expense only part of its cost) under Section 179 because of the phase-out, you may be able to take the 100% “bonus” depreciation. Absent an extension of this provision by Congress, this goes away in 2014.