The dos and don’ts of Section 179

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You may have heard the buzz around Section 179 recently. And that’s for good reason. Section 179 of the Internal Revenue Service (IRS) code allows businesses to deduct the full purchase price of qualifying equipment and/or software during the tax year. You can even finance the purchase rather than pay with cash! That means that if you buy a piece of qualifying equipment, you can deduct the full purchase price from your gross income in that tax year and pay over time. Some lenders even offer graduated repayment programs that would allow you to implement the equipment into your practice, take the tax deduction, start generating cash flow from that equipment, and not make any payments for several months.

But here’s the catch: it changes annually. The maximum allowable deduction and the phase-out threshold are adjusted each year to reflect current economic conditions and legislative changes. This means that what practices deducted under Section 179 last year may not be the same this year. For Section 179 deductions 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.

Now that you know how Section 179 works and what’s new this year, let’s review some do’s and don’ts before you elect your deduction.

Do:

• Speak with a Tax Professional: Be sure to consult with your tax advisor to ensure you are compliant with Section 179 rules and to maximize your deduction.
• Plan Ahead: Identify your equipment purchases as early as possible to take full advantage of the limit. There is still time now, but be sure to purchase and install your equipment before the deadline on December 31, 2024.
• Keep Essential Records: Maintain documentation of the business equipment you purchased during the year, including where you acquired the equipment from and the date the equipment was acquired and placed into service. If filing for any particular year, the equipment must have been leased or purchased and placed into service between January 1 and December 31 of the year you are filing for (Section 179.org).
• Stay Informed: Remain up to date on any changes to Section 179 or tax laws that may affect your deductions. Different tax rules can impact your tax planning.

Don’t

• Wait: Now is the time to purchase your equipment before the year ends, so your equipment qualifies.Furthermore, you may have the ability to implement the equipment or technology AND start generating cash flow for your practice while taking the tax deduction BEFORE making any loan payments.
• Forget About Other Possible Deductions: Section 179 can be applied to various assets such as office equipment including furniture, printers, and copiers, vehicles used for business, computers used for business operations, and business software.
• Assume Automatic Qualification: Verify with your tax advisor that your equipment meets the specific criteria for Section 179 deductions.

By following these do’s and don’ts you can be better positioned to effectively reap the benefits of Section 179, helping to reduce your tax burden while investing in essential equipment.

For a complimentary consultation and to learn more about Section 179, please contact Henry Schein Financial Services online, call 1-877-776-7286, or email hsfs@henryschein.com. To explore Henry Schein Medical’s equipment capabilities, click here.