09.18.09 Issue #393 Forward This Newsletter To A Colleague

Tax “Cash” For Your Practice Clunkers
by Sally McKenzie CEO
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The Cash for Clunkers program recently wrapped up generating plenty of media attention, both positive and negative. But no one is arguing with the results. Thanks to the program, car sales in August were the highest they've been all year, up 26.5% from this July and 1% from August last year. The federal rebate plan saw 700,000 new-car deals worth a total of $2.8 billion before it ended last month. Now there’s talk about a Cash for Clunkers program aimed at old household appliances.

If you didn’t have the opportunity to take advantage of the new car program and your household appliances are working just fine, no need to feel that government leaders have overlooked you. It’s just that you may not be aware of the program that could benefit you and your practice significantly. For dentists, there is no better time than now to consider upgrading major equipment in the practice. Thanks to the Section 179 Tax Allowance, this is an ideal opportunity to cash in significant tax savings and get rid of that clunker of a computer system, upgrade to digital imaging, or invest in that laser handpiece you’ve been coveting for longer than you care to acknowledge.

The Economic Stimulus Act of 2008 increased first-year write-offs of equipment from
$128,000 up to $250,000 for 2008. Section 179 allows businesses to take a deduction for the cost of qualifying equipment and certain software purchases immediately, instead of depreciating it over a period of several years. The amount of qualifying purchases that may be placed in service after December 31, 2007 and before December 31, 2009 increased to $800,000 in 2008.

This represents the maximum amount a doctor can purchase each year, before he or she begins to lose the ability to claim this deduction. The allowable deduction will revert back to $25,000 beginning in 2011. Under the IRS depreciation rules (MACRS, 5-year life, 200% declining balance), 20% of the cost of equipment may be deducted the first year the equipment is placed in service.

How does it work? Any equipment you purchase will have an immediate tax write off up to $250,000 the first year.

Dental Equipment Purchased - $ 300,000
1st year write off Section 179 - $ 250,000
Normal First Year Depreciation (20%) - $ 10,000

Total Deduction 1st Year - $ 260,000
Marginal Tax Rate - 35%
Tax Savings - $ 91,000

Want to know more? Contact Jason Tyson, VP at Bank of America Practice Solutions 877-541-3535 or jason.m.tyson@bankofamerica.com and ask him how Section 179 can benefit you.

Calculate Your Potential Savings with the IRS Section 179 Allowance*

  Cost of Equipment Section 179 Allowance New Equipment Costs (after 179) Total Savings (after 179) Normal Depreciation
$ 5,000 5,000 3,250 1,750 0
$ 10,000 10,000 6,500 3,500 0
$ 15,000 15,000 9,750 5,250 0
$ 20,000 20,000 13,000 7,000 0
$ 25,000 25,000 16,250 8,750 0
$ 30,000 30,000 19,500 10,500 0
$ 35,000 35,000 22,750 12,250 0
$ 40,000 40,000 26,000 14,000 0
$ 45,000 45,000 29,250 15,750 0
$ 50,000 50,000 32,500 17,500 0

*Some restrictions on purchase amounts may apply. The above are possible tax scenarios

Next week, get existing patients into the practice before year’s end.

Interested in speaking to Sally about your practice concerns? Email her at sallymck@mckenziemgmt.com. Interested in having Sally speak to your dental society or study club? Click here.

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