If you've been thinking about making a capital equipment purchase, consider doing it before the end of the year to receive the tax benefits next year.
If you've been thinking about making a capital equipment purchase, consider doing it before the end of the year to receive the tax benefits next year, says Gary I. Glassman, CPA, a Veterinary Economics Editorial Advisory Board member.
With the expensing election on new-equipment purchases under IRS code section 179, the amount that can be written off in 2007 is $125,000. Without this election, you'd get to write off only a portion of the purchase price every year as the equipment depreciated over time.
To qualify for the deduction, the equipment must be what the IRS calls "placed in service." That means it must be delivered and used in your practice by the end of the year, but it doesn't have to be paid for, Glassman says.
Say you're in a 34 percent tax bracket. If you maxed out the election and bought $125,000 worth of equipment, the deduction would be worth $42,500 ($125,000 x 0.34), taking quite a chunk out your tax bill. The full benefit of the deduction is available as long as you have at least $125,000 of taxable income and your entire equipment purchases for the year are $500,000 or less. The deduction is limited to your taxable income.
So if you're mulling over that sparkly new digital radiography system, celebrate the season and get shopping.