Busting tax myths about equipment purchases

Jim Brady: ©Henry Schein Financial Services

Tax planning is an important step in helping to maintain a thriving medical practice. And the earlier you start tax planning, the more time you and your practice will have to maximize tax-saving options. Now is the time to make “tax moves” to optimize planning before it is too late.

This is where Section 179 comes in. Section 179 refers to the Internal Revenue Service (IRS) code that allows business taxpayers to deduct the full purchase price of qualifying equipment and/or software during the tax year, rather than a little at a time over that asset’s useful life. This means that if you buy (or lease) a piece of qualifying equipment, you can potentially reduce your tax liability – this is applicable if you purchase the equipment outright or utilize financing. According to Section 179.org, it’s an incentive designed to encourage businesses to buy equipment and invest in themselves.

While Section 179 offers a significant tax break for businesses, including medical practices, there are some misconceptions surrounding this valuable tax incentive.

Let's debunk some of these common myths so you can start saving now.

Myth 1: Section 179 is only for small businesses.

While Section 179 was initially designed to benefit small businesses, it is available to businesses of all sizes. As long as a medical practice meets the qualifying property and expenditure limits, it can take advantage of this tax break.

Myth 2: You don’t need professional advice.

Tax laws can be complex, so practices owners should seek advice from qualified tax professionals. By consulting with tax professionals, you can stay informed about changes in tax laws, maximize Section 179 benefits, and ensure full compliance with tax regulations. Keep in mind the essential documents needed before meeting with a tax professional, such as financial statements, tax returns, insurance policies, loan statements, and other records.

Myth 3: Section 179 is only available for tangible property.

Different types of property qualify for a Section 179 deduction. Section 179 is only applicable for business purposes. This may include tangible property such as equipment, X-rays, computers, and telephones, intangible assets such as off-the-shelf software, and improvements to real estate such as roofs, heating, ventilation, and air-conditioning. Remember that according to the IRS, Section 179 does not cover real estate purchases.

Myth 4: The dollar limit remains the same each year for Section 179 deductions.

There is a maximum dollar limit for Section 179 deductions that changes annually. In 2024, you can now deduct up to $1,220,000 on new or used equipment, property, and vehicles. This increased from $1,160,000 in 2023. The vast majority of practice owners have equipment purchases well below this limit, allowing them to achieve a 100% deduction on all of their capital investments.

Myth 5: You can't claim Section 179 if you finance equipment.

Practices can claim Section 179 deduction on purchased or financed equipment. It is important to note that the equipment must be purchased or financed in the tax year in which you are claiming it. Be sure to also carefully consider the terms and options available to ensure they align with your practice’s specific needs.

Let’s get saving!

Now that we’ve reviewed some common myths about Section 179, it’s time to get started on maximizing those deductions. With 2025 on the horizon, you can start the new year off with enhanced overall financial health for your practice by taking full advantage of the Section 179 tax deduction.

Jim Brady is the Senior Director of Sales for Henry Schein Financial Services.

As always, it is important to consult your own financial and tax advisors to discuss your individual circumstances. Neither Henry Schein, Inc. nor Henry Schein Financial Services provides tax advice. This article contains general information only and Henry Schein is not, by means of this article and information rendering accounting, business, financial, investment, legal, tax or other professional advice or services. This article is not a substitute for such professional advice or services, nor should it be used as a basis for any decision that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional tax advisor to discuss your individual circumstances and determine your eligibility. Henry Schein, Inc. and its affiliates and related entities shall not be responsible for any loss sustained by any person who relies on this information in this article.