Tax Planning and 179

by Larry Emmott on August 12, 2009

in General,Management

I have been writing quite a bit about change in the past few days. If you are considering a high tech purchase, the tax code (for US dentists), has a provision that can help make that change easier on your wallet.

Of course all this is presented here with the usual gibberish about me not being an accountant and you should check with your professional tax advisor before making any investment decisions and all that.

Generally section 179 of the tax code allows us to write off up to $250,000 as an expense this year on any capital purchase placed in service before December 31, 2009.

That means you can buy a CAD-CAM machine or an i-Cat and write it all off, right now, this year. No depreciating it over the next five to seven years. (That ain’t no small change.)

Several important features to keep in mind:

The law is in place for 2009 and has not yet been extended to 2010. Speculation varies as to what the new administration will do.

If the law is extended that will be nice for next year however the chance to get a write off benefit for 2009 will have passed. You either use it or lose it.

The law states the new purchase must be in service before the end of the year. That means a purchase does not qualify if you simply place an order in December. So for many items you need to be planning now to place an order before November to insure delivery and installation before December 31.

This also means you do not need to pay for it this year to get the tax write off. You can defer payments and still take the deduction as long as the item is in service.

When you are evaluating the ROI on a major high tech item this tax benefit can be very significant. It can reduce your actual after tax cost by as much as 30%.

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