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Those brisk November days are a sudden reminder that the 2016 year is soon coming to a close. If you own an ophthalmic practice, that also means you are running out of time to update your practice with new equipment for a full deduction in your 2016 taxes.
The IRS Tax code, Section 179, allows businesses to deduct the full purchase price of qualifying equipment. We know, it seriously sounds too good to be true. But this tax incentive was put into place to help establishments—like your practice—stay up to date with equipment that will boost business and keep you successful.
We’re sure you have some questions about Section 179—so here are some answers and direction to ensure you don’t miss out on this opportunity.
First of All, What Is Section 179?
This tax code, put into place by the U.S. government to encourage business growth and improvement, allows businesses to deduct the total purchase price of qualifying software and equipment during the tax year. Ultimately, the goal is to help small to medium-sized businesses feel tax relief and invest in themselves.
How Section 179 Works
After purchasing a piece of equipment, rather than yearly tax deductibles ($5,000 per year for five years, for example), Section 179 allows the entire cost to be written off—as long as it is under $500,000.
To elect the Section 179 Deduction, simply fill out 'Part One' of IRS form 4562.
Can I Take the Section 179 Deduction if I Lease or Finance Equipment?
Yes! Most leases are absolutely eligible for the Section 179 deduction. Just make sure to check with your financial advisor to ensure your equipment qualifies.
What Equipment Qualifies?
If your practice purchases, finances, or even leases new or used equipment during the 2016 tax year, you qualify for Section 179.
From EMR software to digital refraction systems, most ophthalmic equipment and software qualify—so long as the equipment is purchased or financed and put to use between January 2016-December 2016.
So, as long as the equipment is new to you, is purchased, leased, or financed, and put to use in the 2016 year, you will qualify for the Section 179 deduction.
What Is the Difference Between Section 179 and Bonus Depreciation?
Bonus depreciation can only be used as a deduction for new equipment—whereas new and used equipment both qualify for Section 179. Additionally, bonus depreciation is largely for the benefit for big companies that will spend over the Section 179 limit.
So, What Is the Section 179 Deduction Limit?
This may change from year to year, however, the 2016 price caps include:
Deduction Limit: $500,000 per equipment purchase
Spending Cap on All Equipment Purchases: $2,000,000
Bonus Depreciation: 50%
Does This Limit Include the Number of Equipment I Purchase and Lease Within a Year?
Yup. Your total yearly expenditure—regardless of the number equipment you purchase or lease—cannot exceed the spending cap. This is where bonus depreciation may be of further help to you.
Does the Location of My Practice Make a Difference in My 179 Deduction?
Usually not. But, there are some geographic locations were identified by the IRS as specialized zones that qualify for an increased 179 deduction, including:
- New York Liberty Zona
- Social Enterprise and Renewal Community Business Areas
- Golf Opportunity Zone
How Can I Calculate What My Savings Would Be with Section 179?
We created a custom 2016 Section 179 tax calculator to help you find out exactly how much you would save this year overall.
There’s Still Time
Take a look at our digital refraction systems and their many benefits and consider making the switch before the end of the tax year.
There is a strong shift toward digital now in the ophthalmic industry. The Section 179 deduction is the perfect opportunity for you to update your office to the digital age standard.