General business tax practices call for any fixed asset placed in service to be capitalized and depreciated over a set period of time (typically five to seven years) until its book value is zero. Qualified Section 179 deductions, however, allow the entire cost—with certain stipulations—to be taken immediately in the year the asset is placed in service. Such immediate deductions can be valuable as they free up cash for expansion, growth and self-investment.
For a veterinarian in a U.S. practice in a 35% tax bracket, the typical Section 179 deduction/tax savings for each Biovision suite is:
- NeedleView Arthroscope Suite
- $5,232 in tax savings (calculated as $14,950 purchase price x 0.35)
- Takes effective cost down to $8,417
- The typical NeedleView customer bills each NeedleView procedure at $1,000 and performs 2-4 procedures per month
- EndoDiagnostic+Surgical Suite (EDSS)
- $12,582 in tax savings (calculated as $35,950 purchase price x 0.35)
- Takes effective cost down to $23,367
- The typical EDSS customer bills each EDSS procedure at $500 and performs 4 procedures per month
Plan capital expenditures — such as the purchase of endoscopic/laparoscopic and/or arthroscopic equipment suites — wisely, factoring in current and future practice needs, price, return on investment, useful life/depreciation and tax deductibility. If old equipment needs to be replaced to sustain a currently-offered service, the determination is relatively simple. Don’t limit your vision, though! Take time to consider how new equipment or technology could help expand your service lines, add to your skills (even re-igniting your passion for your work), and set your practice apart from the competition for being innovative or offering the highest standard of care.
It’s crucial that you place your new equipment into service by December 31, 2016 if you wish to take the Section 179 deduction for the 2016 tax year. Orders should be placed ASAP to allow sufficient time for processing, shipping, delivery/set-up and integration into your practice by December 31.