WHAT YOU NEED TO KNOW IN 2023

Planning your next dental equipment purchase? Whether you intend to buy, finance or lease, you may be qualified to take advantage of substantial tax savings under Section 179 again this year.

Here’s your guide for navigating Section 179, bonus depreciation and other bottom-line enhancing tools in 2023.

Deduction limits

The Section 179 deduction limit for 2023 was raised to $1,160,000 and the total equipment purchase limit was raised to $2,890,000. This is an increase from the 2022 Section 179 tax deduction which was set at a $1,080,000 limit with a threshold of $2,700,000 in total purchases.   

Using the Section 179 deduction, you can write off the entire purchase price of qualifying equipment up to the deduction limit. In recent years, qualifying equipment was expanded to include both new and used equipment. This definition of qualifying property remains in effect for 2023. 

Impact on equipment costs

The potential savings from Section 179 can have a significant impact on your equipment costs. If you’re considering an equipment purchase in the current tax year, you can use this guide to estimate the tax deduction.

For example, $20,000 in equipment purchases coupled with Section 179 can reduce the true cost of the purchase to $13,000, freeing up $7,000 in cash savings. This sample calculation assumes a tax bracket of 35%.

Other takeaways

Although tax incentives like Section 179 and bonus depreciation can be beneficial, these provisions should only be used in situations that make long-term financial sense for your dental office. That’s why it’s important to always consider your tax circumstances and cash-flow requirements when using these tools.

Before making any large capital purchases, it’s a good idea to consult with an accountant or tax adviser to ensure deductions are claimed according to the Section 179 code. Keep in mind not all states conform with federal increases to expensing limitations or the federal treatment of bonus depreciation provisions.