Maximizing applicable deductions can result in a larger tax refund. There are a plethora of deductions that are missed each year, simply due to the fact that people are unaware of what constitutes a qualified deduction. Certain small business tax incentives can be particularly helpful for dental specialists. The IRS issued specific guidance on deducting expenses under Section 179, which can be incredibly beneficial for maximizing tax deduction, and potentially increasing one’s tax refund, especially as a dental specialist. It is important to note that the specific guidelines surrounding Section 179 can change at anytime. In fact, the IRS has recently announced that the deduction limit has increased from $1,000,000 in 2019 to $1,040,000 in 2020. It is, therefore beneficial to remain aware of the most up to date tax code guidelines, so as to assure your company is gaining the maximum benefits from Internal Revenue Service Code Section 179 deduction.
Section 179 allows small business owners to claim deductions such as the cost of purchasing or financing qualifying equipment and/ or software that is installed and/ or implemented within the tax year. This enables a taxpayer to deduct the cost of these qualified items (up to $1,000,000 in 2019) on his or her income tax instead of needing to claim them an expense to be capitalized and depreciated. In order to keep Section 179 exclusively beneficial for small businesses, there is a spending limit set in place that disqualifies larger companies from claiming Section 179 deductions. The spending threshold for equipment purchased is $2,500,000, and if your practice exceeds this spending limit on qualified items purchased for the year you will be ineligible for the Section 179 deductions.
Qualifying Deduction Items
There are many items that can qualify as Section 179 deductions. While specific lists of items can be located online, below are several examples of material goods that qualify:
- Tangible personal property used in business
- Off-the-shelf computer software
- Office furniture
- Equipment (i.e. machines, dental chairs, x-ray machines…etc.)
- Business vehicles (with some limitations)
The above examples qualify regardless of whether they were new or previously owned, purchased outright, financed, or leased, provided they were purchased and implemented within the calendar year for which they are being claimed as deductions. Any dental practice will require a certain amount of business equipment to function and provide patients with services they need. One of the purposes of Section 179 is to provide small businesses with a small tax break by incentivizing them to purchase and/ or lease the necessary equipment during the calendar year in which it is needed.
There is a strict cut-off for purchasing and/ or leasing items that can be categorized under the Section 179 tax deduction, additionally items that are not installed and/ or implemented within these time restrictions will not qualify. The deadline for purchasing and installing qualified dental equipment and software is the last day of December in any calendar year (i.e. December 31, 2020). In order to assure items purchased can qualify as deduction for the desired year it is helpful to provide your equipment supplier with enough lead-time, prior to the 2020 deadline.
For Further Information
If you follow your instincts and are clear with your needs you will likely find an accountant that is an excellent fit. While the task to connect with the right accountant may seem overwhelming, please keep in mind it will be worth it in the long run. The financial guidance that a good accountant will provide during one’s lifetime can result in significant financial gain. With the full range of accounting services Allman & Allman APAC provide, we are certainly equipped with the expertise for which you may be in need. Seeking guidance from our firm will proved you the opportunity to work with individuals armed with broad and deep financial knowledge, able to provide advice on a wide range of issues. As a full-service public accounting firm, our professional services will surely help you succeed and thrive. Please feel free to reach out to Allman & Allman APAC via email at Genna@apapd.com or via phone at 760-406-5056 to discuss your situation and find out how we can help you grow. We look forward to hearing from you.
“IRS Issues Guidance on Section 179 Expenses and Section 168(g) Depreciation under Tax Cuts and Jobs Act.” Internal Revenue Service, www.irs.gov/newsroom/irs-issues-guidance-on-section-179-expenses-and-section-168g-depreciation-under-tax-cuts-and-jobs-act.
“New Rules and Limitations for Depreciation and Expensing under the Tax Cuts and Jobs Act.” Internal Revenue Service, www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act.
“Section 179 Information for Businesses.” Section179.Org, www.section179.org/.
Taxes and 179 Expensing, www.ada.org/en/publications/ada-news/2019-archive/january/taxes-and-179-expensing.