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Fiscally Fit in 2008

Issue: Fall 2009
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Dentistry has fared better in the present economic environment than many other industry sectors.

In speaking with dentists nationwide, I have learned that many face increased demand for their services and are booked ahead anywhere from one to three months. A combination of existing tax incentives, (IRS Section 179 and Section 44), the Economic Stimulus Act of 2008 and substantially lower interest rates make this a strategic time to invest in your practice to meet the demands of healthcare today. Because of these beneficial conditions, installing equipment and technology in 2008 can create a cash flow win for dentists in the know! Please check with your individual advisor to determine your own eligibility.

Economic Stimulus Act of 2008.

 This bill was signed into law February 13, 2008. In addition to benefits to individual taxpayers, this is a massive stimulus bill with business incentives to help dentists financially. It retains one of the business community’s most sought after tax incentives—doubling Section 179 benefit to $250,000 and a 50% depreciation “bonus.” For dentists, the most important part of these tax breaks is the temporary double Section 179 and 50% bonus depreciation. These tax benefits will expire on December 31, 2008. The bonus depreciation is allowable for regular and alternative minimum tax (AMT) purposes for the tax year in which the property is placed in service. Property eligible for this treatment includes:

  •  Property with a recovery period of 20 years or less (almost all dental equipment) 
  •  Standard software/practice management software

Annual Internal Revenue Code Section 179.

This is an annual “use-it-or lose it” accelerated deduction (lowers your taxable income) benefit. This deduction is available whether you are a sole proprietorship, a partnership, or a corporation. As long as the equipment is placed in service by December 31, 2008, you may be eligible. If you plan to acquire equipment in the near future, purchasing it before year’s end is prudent. Utilizing a finance agreement or capital lease to acquire technology or equipment will qualify for this benefit (where true leases or fair market value agreements will not). Thus, if you use a finance agreement to acquire your equipment and you have deferred payments, you may file your tax returns and achieve the benefits before you have made any payments. The remaining basis qualifies for the 50% temporary depreciation bonus rule.

Don’t wait too long to acquire technology or upgrade your office. Although it is true that you can have equipment placed in service by December 31 to take advantage of the incentives, waiting too far into the year may mean that you’ll settle on your selections because of diminished year-end selections. Now is the right time to sit with an equipment or technology specialist and discuss acquiring the optimal productionenhancing technology and equipment that will help your practice stay “fiscally fit.”

Keith Drayer is Vice President, Henry Schein Financial Services (HSFS). HSFS provides equipment, technology, practice start-up and acquisition financing services nationwide. Mr. Drayer can be reached at 1-800-853-9493 or hsfs@henryschein.com. Please consult your tax advisor for your individual circumstances.

Information applies to U.S. practitioners only