As the end of the year approaches, so does an important deadline for practice owners—purchasing deadlines to qualify for Section 179.
The Section 179 Tax Deduction presents small and medium-sized business owners a unique opportunity to save thousands of dollars on their taxes in the upcoming year. If your hearing care business and purchases qualify, you too can take advantage of the benefits of Section 179.
However, practice owners who want to save on their 2023 taxes must make any additional qualifying purchases soon to beat the impending December 31st deadline. So, what do you need to know about the Section 179 Tax Deductions before the end of the year?
Here is MedRx’s quick guide to Section 179 with helpful resources and examples tailored to the hearing care professional
What is Section 179?
Section 179 of the U.S. Code 26, or the Internal Revenue Code, refers to a part of the tax code that expresses the "Election to expense certain depreciable business assets." Simply put, Section 179 offers business owners an immediate expense deduction for purchases of depreciable property.
In a hearing clinic, this depreciable property can include anything from waiting room furniture to new computers to testing and fitting equipment. How you allocate your spending will depend on your practice's needs during the applicable tax year.
In prior years, you would have had to write off a portion of these expenses over a few years, which often costs more for practice owners upfront and would make it difficult for you to invest back in your business.
Section 179 allows practice owners to write off the entire purchase price of qualifying purchases in the year it was first put into service. This process gives you time to grow your business by allowing you bandwidth to buy, use, and write off larger purchases all in the same year.
Purchasing new testing and fitting equipment is one of the most common ways practice owners take advantage of the law because most audiological equipment, and all MedRx equipment, meet the qualifications of the code.
Breaking Down Section 179
While businesses in many industries can apply Section 179 during tax season, the hearing care industry is unique in operation. Below, we break down an example of a clinic purchasing MedRx equipment using Section 179 to demonstrate how you may decide to take advantage of Section 179’s tax relief. For this example, we'll assume that the business is in a 35% tax bracket.
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Cost of New MedRx Equipment
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$20,000
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Amount Deductible (purchase price falls under the deduction limit, so the entire amount can be written off)
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$20,000
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Tax Savings After Write-Off
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$7,000*
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New Cost of MedRx Equipment (subtracting tax savings)
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$13,000
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Total Savings (not including MedRx End of Year discounts!)
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$7,000
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* assuming the business is in a 35% tax bracket
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If you'd like to determine a more accurate calculation based on details related to your practice, you can also utilize the Tax Deduction Calculator found on Section179.org.
Limitations Under Section 17
While all MedRx equipment meets the requirements set forth by Section 179, there are several limitations to keep in mind to ensure you get your entire deduction:
- The 2023 deduction limit is $1,160,000 (up $80,000 from last year)
- The spending cap for all business-related equipment purchases is $2,890,000
- You must use the equipment or software for business purposes more than 50% of the time
- The equipment must be purchased and put into use by midnight December 31st, 2023
These product limitations ensure that the tax break is only exercised by true small to medium-sized businesses, though any business spending more than the spending limit can still utilize Bonus Depreciation for additional tax relief. In 2023, Section 179 will offer 80% Bonus Depreciation. You can learn more about deduction limits, spending caps, and bonus depreciation on Section179.org.
Utilizing Section 179 Deductions with MedRx
MedRx's End of Year Savings offers you the chance to purchase almost any product at a discounted rate. Our annual equipment specials can save you hundreds on your equipment, and even more when you write them off your 2023 taxes!
Every MedRx product meets the requirements for Section 179, including new software purchases like STUDIO and Hearing BI and systems like the AWRC (Audiometer and Wireless REM Combination System). After your MedRx discount is applied, writing the equipment off with Section 179 ensures you save an additional percentage off the purchase price.
To learn more about new MedRx equipment, give us a call at (888)392-1234 to schedule a free online demonstration, or ask us about our End of Year Savings for even greater discounts on advanced testing and fitting equipment!