2011 Tax Break – Section 179: Fully Deduct Your EHR Purchase

Doctors and Administrations: Don’t miss out on your 2011 tax break.

Internal Revenue Code Section 179 allows you to deduct the full purchase price of equipment—like your EHR software and hardware purchases—from your practice’s gross income.

Here’s an example: If your practice is in the combined federal/state tax bracket of 40%, a $350,000 equipment purchase can result in Section 179 tax savings of $140,000.

So, what qualifies for the tax deduction under Section 179? Here is a quick overview:

Qualified purchases for deduction:

  • Medical equipment & machines
  • Computers
  • Off-the-shelf computer software (EHR)
  • Office furniture & equipment
  • Equipment purchased for both business and personal use (the deduction is based on the percentage of time the equipment is used for business purposes)
  • Tangible personal property used in business

Limitations:

  • The purchases limit is $2 million dollars.
  • The deduction limit is $500,000.
  • These enhanced deduction and purchase limits are set to revert back to previous limits in upcoming years.*
  • Section 179 expensing is only allowed for off-the-shelf computer software placed in service in tax years beginning before 2012.

Purchase & Usage Time:

  • The equipment must be purchased and placed into service in the same tax year.
  • To deduct in 2011, you must purchase, implement, and actively use the EHR between 01/01/2011 and 12/31/2011.

Section 179 offers a tax break to boost the financial benefits of purchasing new technology to support physicians in providing enhanced patient care. The break allows practices to maximize their purchasing power.

Take advantage of this opportunity—verify that your medical practice is leveraging the Section 179 deduction this year and invest in a user-friendly, intuitive EHR that has a proven track record for success.

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*Unless there is a law change, the dollar limit for qualifying fixed assets will be $139,000 with an investment limit of $560,000 for 2012, and no allowance at all for off-the-shelf computer software. The 100% bonus depreciation provisions will also expire for most types of assets placed in service after 2011, and be replaced by 50% bonus depreciation for assets placed in service in 2012. There are currently no bonus depreciation provisions for most assets placed in service after 2012.

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