The 6 Most Common Questions About the Section 179 Tax Deduction
Penny-pinching is something that every money conscious person, either in their personal or professional endeavors, strives for. When it comes to taxes, there’s one deduction that is particularly beneficial for medical practices: the Section 179 Deduction. But for all its usefulness, this deduction will be of little use if a practice is unaware of it.
Here are the answers to the 6 most common questions about the Section 179 Deduction.
What is the Section 179 Deduction?
Section 179 of the IRS Tax Code allows a business to deduct, for the current tax year, the full purchase price of equipment and off-the-shelf software that qualifies for the deduction.
What equipment and software qualifies for the deduction?
Almost all types of “business equipment” qualifies for the Section 179 Deduction! Examples per the official Section 179 website include:
- Equipment purchased for business use
- Tangible personal property used in business
- Business Vehicles with a gross vehicle weight in excess 6,000 lbs
- Computer “Off-the-Shelf” Software
- Office Furniture
- Office Equipment
Computer “off-the shelf” software includes EHR, PM, and RCM software, but only if the systems meet these specifications:
- The software must be purchased or financed with specific qualifying lease or loan
- The software must be used in your business for income-producing activity
- The software must have a determinable useful life
- The software must be expected to last more than one year
- The software must be readily available for purchase by the general public
- The software must be subject to a non-exclusive license
- The software must not have been substantially modified
What are the Section 179 Dollar Limits?
The amount varies by year. Currently, Section 179 allows for up to $1 million dollars in eligible equipment to be deducted. However, the “total equipment purchased” cannot exceed 2.5 million. Once the equipment purchased passes that number, the deduction reduces on a dollar for dollar basis.
Can I lease or finance equipment and take the Section 179 Deduction?
Yes! And this strategy may actually prove to be more financially beneficial; the deduction you take may actually exceed the total loan or lease payments you will make.
Does the date of my purchase have an impact on the Section 179 Deduction?
Yes. Qualifying purchases for any given tax year must be purchased/financed/leased and placed into service January 1st and December 31st of that year.
How can I elect the Section 179 Deduction?
To elect the Section 179 Deduction, you need to fill out “Part One” of IRS Form 4562.
While the 2018 tax year has already passed, it's not too late to implement this deduction for the 2019 fiscal year.