Section 179: What Every Practice Needs to Know

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Billing, coding, compliance, documentation, mal practice insurance, post-payment audits, payroll, taxes, rent, equipment, EHR software: these are the realities of running a practice that are almost never what students think about when they enter chiropractic college – and we haven’t even mentioned the adjustment yet. Running a successful practice also means running a smart business, and one of the smartest moves a DC can make is to take advantage of the Section 179 Deduction offered each year.

Section 179: What Exactly Is It?

The official description: Section 179 of the United States Internal Revenue Code (26 U.S.C. § 179), allows a business to elect to deduct the cost of certain types of property on their income taxes as an expense, rather than requiring the cost of the property to be capitalized and depreciated. This property is generally limited to tangible, depreciable, personal property which is acquired by purchase for use in the active conduct of a trade or business.

What it means to a DC: The cost of any equipment (computers, tables, or EHR software) can serve as a write-off. So, if a DC purchases EHR software in 2015, they can write off the amount of that expense against their income – up to $25,000.00. The good news is this: a DC can take the FULL deduction of the total amount owed even if they’ve only made one payment – and this makes switching before the end of the year to a new EHR software system ideal! For example, a DC makes two payments of $200.00 in November and December on EHR software that costs $8,000.00 – he/she can take the full deduction of $8,000.00. This makes buying software profitable for the current tax year! This is completely legal and is a good example of why DC’s need to take advantage of this incentive, and why there is no better time to switch.

What Can Be Deducted?

Please keep in mind that to qualify for the Section 179 Deduction, the equipment listed below must be purchased and put into use between January 1 and December 31 of the tax year DC’s are claiming.

  • Equipment (machines, etc) purchased for business use
  • Tangible personal property used in business
  • Business Vehicles with a gross vehicle weight in excess of 6,000 lbs
  • Computer Equipment
  • Computer "Off-the-Shelf" Software
  • Office Furniture
  • Office Equipment
  • Property attached to a building that is not a structural component of the building

Partial Business Use – equipment that is purchased for business use and personal use (i.e.: a laptop): generally, a deduction will be based on the percentage of time a person uses the equipment for business purposes.

How to Take Advantage of Section 179?

A DC can elect to take the section 179 deduction by completing Part I of Form 4562. Visit this link to be taken directly the the IRS official web page on Section 179.

Section 179’s limits can change each year, and in fact have even changed mid-year, so every DC must take advantage of the opportunity while they still can.