For single-site practices that are expanding, or for practices that will be remodeled to improve operational efficiency, it is important that the office is equipped with the most current equipment and technology. As clinicians consider expanding or upgrading, there is no better time than now to make these investments, while interest rates are still low and end-of-year tax savings are available, thanks to Section 179.
In September 2017, a broad outline of a plan to make major changes to the tax code was announced. Practitioners should keep an eye on updates to the tax reform as it unfolds. If approved, there will be substantial and material changes to tax brackets and other aspects of clinicians’ business and personal lives. One of the proposals reduces the current marginal individual income tax brackets. For example, the current top rate of 39.6% would drop to 35%. This means that if a clinician acquires equipment, technology, or off-the-shelf software in 2017, then his or her deduction at the highest tax bracket would be worth more, and lowering taxable income in a higher tax bracket is a favorable opportunity to leverage.
The Federal Reserve has publicly announced that it is decreasing its treasury and mortgage-backed securities purchases, which will affect interest rates as a result of a shift in the supply and demand of debt securities. As a result, locking in fixed, long-term rates sooner rather than later could prove to be beneficial. These are important considerations so that practitioners don’t pay higher financing costs on equipment purchases, computers, software, and furniture.
By leveraging the Section 179 tax deduction now, many dental practice owners can take advantage of the $500,000 benefit that allows them to deduct all or part of the purchase price of qualifying purchases (equipment, technology, and off-the-shelf software) when they pay their 2017 taxes next year. The Section 179 deduction reduces the after-tax cost of acquiring depreciable business property by accelerating the tax deductibility of some or all of the costs of acquiring the assets.
Tax consequences aside, practices can balance technology costs while using the latest, most efficient equipment. The new technology or equipment can provide improved efficiency or other benefits to the practice. The benefits of revenue improvement or cost savings can be realized sooner if the equipment or technology is purchased now. It is the best fiscal medicine for a dental practice to be financially strong.
To help achieve immediate savings, financial experts, such as Henry Schein’s Financial Services’ team, can obtain highly competitive financing rates for equipment, technology, and renovations. Your financial expert can offer deferred payment options so a practice can start generating revenue using new equipment now, maximizing after-tax savings on 2017 taxes, and paying for it next year.
Author’s note: This is not tax advice. We strongly encourage you to check with your own advisors as individual scenarios vary and Henry Schein Financial Services does not provide tax advice.
Keith Drayer is the vice president and general manager of Henry Schein Financial Services. If you want to hear more about year-end equipment financing or have questions about practice and patient financing options, call (800) 853-9493 or email [email protected].