UPDATE: As of December 2015, the Section 179 deduction has been raised retroactively to up to $500,000 on qualifying purchases up to $2,000,000 through 2016. 50% bonus depreciation has also been reinstated.
If you've taken advantage of - or simply followed - the Section 179 tax deduction in the last few years you're aware already that it seems to be in a continuous state of flux. It will probably come as no surprise then when we tell you that has not changed in 2015.
Presently, the deduction is $25,000 for qualified equipment purchases between $25,000 and $200,000 that are delivered and installed by December 31, 2015. The deduction drops dollar-for-dollar as you spend over that. A 210k purchase will get a 15k deduction, a 220k purchase a 5k deduction, and so on until the deduction vanishes at 225k.
That's a significant difference from last year's numbers which granted deductions up to $500,000 on purchases up to $2,000,000. On the surface, it's easy to see why this change could make the deduction seem almost negligible for big-ticket systems like MRI and cath/angio suites, but we want to share four reasons why we think Section 179 still matters in 2015.
A $25,000 Deduction Is Still a $25,000 Deduction
This is the most obvious reason why Section 179 still matters. Assuming a 35% tax bracket, a $25,000 deduction will save you $8,750 on top of the depreciation you are already entitled to claim. This figure is still a nice perk, albeit a smaller one than you may have received in previous years.
The example to the right is a screen shot from Crest Capital's Section 179 calculator showing the tax savings on an equipment purchase at the spending cap for the maximum deduction.
New or Refurbished, the Deduction Applies
The deduction is a flat figure for all qualified purchases between $25,000 and $200,000, with no stipulation that the equipment be new. This means that not only can you get a significantly lower price by purchasing a refurbished system, you can also claim Section 179 on systems that might be above deduction limits when you purchase them brand-new (64-slice CT or open MRI, for example).
Lower Cost Modalities
While, at its current limit, Section 179 may not provide a particularly large savings for purchasing the more costly modalities (3.0T MRI scanners or digital cath/angio labs, for example), the deduction represents a more substantial savings for lower cost systems like digital mammography, C-arms, X-ray rooms, or even some CTs. If you have upcoming needs in these modalities, 2015 might be a good year to consider making an upgrade.
The Deduction Has a History of Being Raised
$25,000 is the current official limit, but Congress could still change that as they have in years past. This happened just last year, in fact. On January 1st, 2014, the limits fell from $500,000 to $25,000 only to be raised back to $500,000 retroactively in December 2014 via HR 5771. While this is encouraging, it's important to remember that, however likely it is that this will happen, the equipment must still be purchased and installed by December 31, 2015 to qualify.
For now, it looks like Section 179 will be a less meaningful tax relief than it has been in the past- but it is still a form of tax relief and there is still time to take advantage of it.
For those of you looking to purchase in the lower cost modalities, we're ready to help you select the best equipment for your facility and get it installed in time to claim your $25,000 deduction. The same is true for those of you who can bring those fringe systems 20 - 35% above the Section 179 bracket into eligibility by choosing a refurbished system as opposed to a brand-new one.
For those of you looking to purchase big-ticket systems, Section 179 at its current limit has no bearing on your decision. However, if history repeats itself and the limits are restored to what they were last year, anyone who made their purchase (up to $2,000,000) early enough to have it installed by December 31st will be able to claim their much heftier deduction.
In either case, our team is here to answer your questions about equipment, installation, and Section 179. Contact us to let us know what you're looking for and how we can help you find it.