Congress passes Section 179 extension ... what that means to you and your dental practice

I consider myself to be a pretty decent dentist, but I’ve never considered myself to be the kind of guy who could tell his CPA, “Don’t worry about filing for me this year. I’ve got this.” I mean, we all have our core competencies, but mine lie more in the area of linear thought, sketching schematics, programming, clinical testing, and that sort of mundane stuff.

One of the great benefits of my life has been a marriage to a sweet gal who, to this day, remains my best friend, but also happens to have a finance degree. This means that I have someone I can rely on when it comes time to remove my shoes and socks to perform long division or compound interest.

Since the economic downturn in 2008, dentistry has had a bit of a cushion in the form of a tax provision called “Section 179.” Unfortunately, all good things must come to an end and there had been concerns this year because 2013 had seen the end of the major benefits of Section 179. The unfortunate reality was that in 2014, rather than a large helping hand, dental practices were looking at a $25,000 write-off instead of the much larger amounts given in the past.

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However, shortly before noon on December 19, 2014, I received an email from the American Dental Association. The email stated the following:

Congress Passes Section 179 Tax Provision

Thank you for participating in the American Dental Association’s grassroots efforts! We are pleased to inform you that Congress has just passed H.R. 5771, the Tax Increase Prevention Act of 2014 which has extended the Section 179 expensing tax provision for 2014. ADA has worked hard to ensure passage of this bill, which will allow small businesses to write off up to $500,000 of capital investment in 2014. ADA members sent over 8,500 emails to Congress in the last month urging lawmakers to extend this important provision. In addition, ADA staff met with key legislators and staff about this issue throughout the year and we are glad to see passage of this important tax provision.

Without passage of H.R. 5771, dental practices would have only been permitted to write off $25,000 of investments in 2014, and the tax benefit would have phased out for investments above $200,000. This is a major victory that will ensure dental practices will not face a tax hit because they purchased much needed equipment and technology. President Obama is expected to sign H.R. 5771 bill into law when he receives it.

Because H.R. 5771 only applies to the 2014 tax year, the ADA will continue fighting to ensure tax fairness for small businesses by working to make Section 179 permanent in the coming year. To learn more about the ADA’s advocacy efforts please visit www.ADA.org/Advocacy.

Editor's Note: President Obama signed H.R. 5771 into law on Friday.

This is really good news for owners of small businesses because Section 179 is designed to help provide “economic stimulus” from when the economy faltered in 2008 due to the subprime mortgage crisis.

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The idea has always been to get business owners to spend money, investing in their business, to both grow their business as well as stimulating the economy due to purchases. However, it was due to expire in 2014, which would have created economic struggles for small business owners. Since Section 179 has been extended, look for economic expansion in the business of dentistry.

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Read the benefits of Section 179 on the next page

Here are some of the benefits of Section 179 for the business owner (courtesy of Section179.org):

Section 179 is a tax code created to help businesses. By allowing businesses to deduct the full amount of the purchase price of equipment (up to certain limits), Section 179 is a fantastic incentive for businesses to purchase, finance or lease equipment this year.

Section 179 is valid on most types of equipment. There is little sense in allowing a deduction on only obscure equipment, so Section 179 is aimed at general business equipment as well as off-the-shelf software. If you use it in your business, it probably qualifies. See a list of qualifying Section 179 equipment.

Section 179 can greatly help your bottom line. By deducting the full cost, you lower the amount you pay for equipment and/or software substantially. And these benefits can be further expanded if you choose to lease or finance your equipment & software.

Section 179 is simple to use. All you need to do is buy (or lease) the equipment, and use a special IRS form. That's it. Details here.

Section 179 enhancements expired at the end of 2013. The various Stimulus Acts over the past few years have included special provisions for Section 179 and Bonus Depreciation, and greatly increased the limits on how much businesses could deduct.

There is simply no better time than now to take advantage of Section 179 and Bonus Depreciation. Why? Because it is a Use-It-or-Lose-It write-off that ends December 31st.

Bottom line is this … take advantage of Section 179 before 2014 comes to a close.

Next page: Six tax deduction highlights, courtesy of Kate Willeford, owner of The Willeford Group.

Six tax deduction highlights, courtesy of Kate Willeford, owner of The Willeford Group.

• Section 179 Equipment Tax Deduction: This has been increased from only $25,000 to $500,000

• State and Local Sales Tax Deduction: If you itemize your taxes, you will now be able to take a tax deduction for these taxes. This is especially helpful if you live in a state that does not have an income tax

• Home Mortgage Insurance Premiums Deduction: If you itemize your taxes, you will be allowed to take a tax deduction for PMI

• Tax Free IRA Withdrawals for Charity: Anyone over 70½ will be allowed to donate up to $100,000 from his or her traditional IRA, without incurring taxes, if the money is distributed directly to an eligible charity

• Tuition Deduction for Education: Even if you do not itemize your taxes, you will be able to deduct up to $4,000 spent on qualified tuition, fees, and related expenses for post-secondary education

• Tax Free Savings for Disabled Individuals: This is attached to the extender bill and is called the Achieving a Better Life Experience (ABLE) Act. With this Act, those who were disabled prior to age 26 will be able to contribute up to $14,000 a year, tax free, into an ABLE account. Not only that, but this provision will also apply to their family and friends!

Editor's Note: Photo by DAVID ILIFF. License: CC-BY-SA 3.0