With new tax laws having just gone into effect, the tax landscape for organizations considering capital equipment purchases has changed in a significant way. Now, a buyer can take an immediate 100% depreciation on the purchase of a piece of used equipment; even equipment that has been fully depreciated by the previous owner. This has caused a stir in several industries (most notably aircraft sales) where the Wall Street Journal predicts, "It could mean a shuffling of assets by companies purely for tax reasons and mergers and acquisitions that exploit new tax edges."1
We don't expect to see assets shuffling wildly in the medical imaging field, given the logistics of relocating the big metal modalities, but we do expect to see some facilities that have been biding their time on upgrades jumping into the market this year to take advantage of their new option for depreciation and deduction. Take a look at the examples below to see the difference.
Example 1: Last Year
A 2012 model CT was purchased in January 2017 for $200,000. The new owner had the option of depreciating the value of the equipment over the useful life of the equipment and dividing the purchase price by that number for their annual deduction amount. For the sake of ease, we'll use a depreciation of five years to get round, average numbers:
- Five-year depreciation election: $40,000/year can be deducted as business expense for five years after the equipment purchase
Example 2: This Year
A 2012 model CT was purchased in January 2018 for $200,000. Based on the new law, the owner now has another option: to take all the depreciation at once.
- Five-year depreciation: $40,000/year can be deducted as business expense for five years after the equipment purchase
- Immediate depreciation of a used asset: $200,000 can be deducted as business expense in year one
Now, under the new tax law, you have another option for how you'd like to claim the tax deduction on your equipment. Depending on your needs and budgeting style, you may prefer the new option to take your full deduction all at once and have more cash in year one. Others may prefer the carry-over options for consistent deductions spread over more years. In any case, the tax outlook for used equipment is at a high point, making 2018 a good year to act on an upgrade or purchase you've been considering; before laws change again. If you have your eye on imaging equipment from any modality, check with your tax accountant or attorney for their recommendations.
Whenever you're ready, we're here to help you answer your questions and claim your deduction this year. Use the button below to tell us how we can assist and get a quote.