As the end of the year nears, your optometric practice will begin to fill with patients attempting to use their benefits for the year before they expire. This surge in traffic can result in an increase in optical dispensing profits and revenue from insurance claims. But, the end of the year also means that’s there are just a few weeks left to take advantage of the section 179 tax deduction.
This post provides information to give you a general understanding of the tax deduction. Since we aren’t tax professionals, it’s strongly encouraged that you speak to your accountant or tax consultant regarding how your optometric practice can take advantage of section 179.
What Your Optometric Practice Needs to Know About Section 179 Tax Deduction
Section 179 allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year to encourage businesses to buy equipment and invest in their business by deducting the full purchase price of the qualifying equipment from their income for the year they bought it.
In 2017, the deduction limit for new and used equipment and qualifying software is up to $510,000, up from the limit in 2016. To take the deduction for the tax year of 2017, the qualifying equipment and software must put into use between January 1, 2017, and the end of the day on December 31, 2017. According to this article, the limit would increase temporarily from $500,000 to $5 million under the proposed tax reform.
Under current rules, section 179 places restrictions on what can be deducted under the rules. Qualifying software and business equipment purchased in 2017 may be eligible for a full deduction.
Equipment
Business equipment that qualifies for the section 179 deduction must be purchased and put into use between January 1 and December 31 of the tax year you’re claiming. Examples of material goods that can qualify include:
- Computers
- Office furniture
- Office equipment
- And more
Software
Under section 179, software that qualifies for the deduction is any “off-the-shelf” software that isn’t custom designed and is available to the general public. In order for the software to qualify, it must meet the following specifications:
- You must purchase or finance the software outright
- Your business must use the software for an income-producing activity
- The software must have a determinable useful life
- The software must more be expected to last more than one year
- The software must be subject to a non-exclusive license
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