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Tax Credit Section 179 FAQS
When to Invest in a New Ultrasound
As private practices and businesses evaluate new equipment purchases this year, one important consideration is the potential impact of Internal Revenue Code Section 179. New business equipment purchases of up to $250,000 placed in service in 2009 can either be depreciated over its useful economic life, or expensed (deducted from taxable income) immediately under Section 179. This can mean substantial tax savings for practices and businesses acting now.
Tax Credit Section 179 FAQS
Q: Would an ultrasound be considered qualifying property?
A: Yes, tangible personal property such as machines, equipment and furniture used 50% or more for business purposes do qualify. The cost eligible for the deduction is the business usage percentage, so for medical practices typically 100% of an ultrasound's equipment cost would be eligible for this deduction.
Q: Are there any dollar limits on the amount of the deduction?
A: The expense amount limit for 2009 is $250,000. The total cost of property that may be expensed cannot exceed the total amount of taxable income after the limit is applied.
Q: Any other caveats?
A: There is a "phase out" clause - any purchase in excess of $800,000 in 2009 reduces the amount of the deduction by a corresponding amount. In other words, if you purchased $810,000, your deduction is reduced by $10,000 to $240,000.
Q: Do leases qualify, or do I have to pay cash?
A: Yes, Finance Leases with a nominal purchase option of $1.00 do qualify for this deduction in the year the asset is placed in service. Fair Market Value and 10% Purchase Option leases do not qualify for 179.
Q: Can you give me an example of how this all works?
A: Here's a simple example of the Section 179 deduction based on the cash price of your ultrasound system, and assuming that your practice has not exceeded the $800,000 phase out noted above.
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This information is provided for informational purposes only, and does not constitute tax advice. Please contact your accountant for more information regarding the impact of Section 179 for your practice or business.