Here's a great opportunity to help your customers AND boost your 2015 sales income, but you must act now (by mid-December at the latest).
Your customers are becoming more sophisticated at running their businesses, and they often recognize and appreciate partners that actively participate and contribute to their success.
This means you. How can you help practices make smart business decision that will benefit them in tax year 2015?
Consider the Internal Revenue Code Section 179 (“Sec. 179”) and Section 168(k) (“Bonus Depreciation”), which state that a taxpayer may elect to currently expense the cost of qualifying property instead of depreciating it. This means practices can deduct certain qualifying capital equipment investments made this year.
What is qualifying property? First, let's look at the IRS definition. Then we'll look at a few examples in the veterinary profession.
IRS Qualifying “Sec. 179 Property” and “Bonus Depreciation Property"
- Machinery and equipment used in an active trade or business
- Furniture and fixtures used in an active trade or business
- Certain depreciable off-the-shelf (“canned”) computer software
- 179 property may be purchased NEW or USED
- 168 bonus depreciation property must be NEW and may include qualified leasehold improvements
Potential qualifying "property" in the veterinary industry
- In-house diagnostic equipment including analyzers, ultrasound equipment, digital imaging, etc.
- Surgical equipment, therapeutic lasers and other equipment for treatment
- Practice-management software, computers and other office tools
- Mobile or standalone tables and storage units (can be wheeled from room to room)
- Modular cabinetry: This one may be a surprise. Modular cabinetry, like the 6065 Treatment Cabinet from Midmark pictured here, is considered furniture or fixtures (section 179 allowed) as opposed to built-in cabinetry (not section 179 allowed). It's likely they have not considered this product category as a potential deduction and therefore could significantly help their bottom line after taxes are taken into consideration.
When you can show your customers the tax benefits of Section 179 and 168, you'll help clinics gain additional functionalities and/or increased efficiencies — enabling them to deliver better patient care while increasing their bottom line. In addition, this helps you make or increase the amount of your equipment sale before the tax year ends.
ACT NOW before it's too late to order equipment for your customers.
Here's how you can help customers take advantage of these tax laws that reward good accounting practices.
- During the practice visit or phone call, explain that Section 179 and Section 168 could reduce the practice's taxable income and may also increase an individual’s itemized deductions.
- Ask the veterinarian, "Have you checked with your accountant to make sure you're maximizing this year's tax incentives for depreciating equipment? You'll want to do this NOW so you can a) understand how these tax laws work, including their annual investment limitations, and b) order equipment before it's too late for 2015."
- Advise the veterinarian to get an early start to avoid the year-end capital equipment rush. Usually a customer must physically possess the product in order to benefit from the deduction. Customers are often not aware of this fact… or that there may be long leads times to receive certain products. Hopefully by raising this issue now, you can help practices get what they want before the December 31st In addition, you'll avoid being in a situation where your customer is forced to buy from your competition because you didn't give them enough time to make purchases!
Important caveat: we are not tax-law experts (attorneys or accountants)… so you'll want to encourage practices to discuss these tax strategies with their own tax professionals.