Tax Code 179 Made Simple - Reduce Your Income Taxes
So you*ve you heard of Tax Code 179 . . . but how do you really use it?
* To reduce taxes practices either reduce revenues or increase expenses
* It is unlikely that practices want to reduce revenues* So increasing expenses is the logical option
* BUT, how does a practice increase expenses but not use any of their cash?
* Depreciation is how*.Tax Code 179 is just using depreciation more effectively
* Tax Code 179 allows a business to fully depreciate (i.e. expense) the cost of the
equipment/software in the year they purchase it
* Depreciation is the expense a practice takes for purchasing and using equipment/software
* Depreciation is one of those rare expenses that DOES NOT require a practice to use money
from its bank account
* Normal expenses like payroll, malpractice insurance and rent are paid with actual cash out of the practice*s bank account
Tax Code 179 REDUCES the effective COST of the Equipment/Software (an example)
* Equipment/Software Quote = $25,000
* Practice*s Estimated Tax Rate= 35%
* $25,000 * 35% = $8,750 in 2014 income tax savings
Doctors can EARN MORE CASH in 2014
* Purchases in 2014
* Finances the equipment/software
* GSG requires NO $$ down and defers the start of the practice*s finance payments until 2015
* Taking the Tax Code 179 Tax Deduction Now with No Money out of pocket for the purchase of
the equipment/software in 2014 means*.
* Doctor owners can take the extra $8,750 in cash (tax savings from example above) out of the
business in form of extra bonuses or pay. They make more MONEY.
Use It or Lose It
* Tax Code 179 is available to practices every year, however, it does not rollover
* 2012 Tax Code 179 Limit: $139,000
* 2013 Tax Code 179 Limit: $500,000
* 2014 Tax Code 179 Limit: $ 25,000 (expected to be increased to $500,000 and retro*d back to 1/1/14)
* 2015 Tax Code 179 Limit: ???