How to Maximize Your Practice’s Returns Prior to Year End
With the end of the year rapidly approaching, many healthcare practice owners are thinking about last-minute strategies to maximize their company’s profitability and overall returns for the year—as well as looking ahead to identify potential savings through tax deductions.
And it is in this regard that the team at LenDRgroup Consulting encourages you to think about the potential associated with purchasing equipment prior to when the clock strikes midnight and turns the calendar from December 31 st to January 1 st.
In this blog, our team will explain the perks associated with a year-end equipment purchase—and how it could help you maximize your practice’s returns.
December is the Best Time to Purchase Equipment
For the majority of businesses—not just healthcare practices—the best time of year to buy equipment of any sort is in December, right before the new year dawns. Why? Well, simply put there are many factors at play, but the most important one is the relationships between tax liability, income, and expenses.
Sometimes, a medical practice finds themselves with unused budget to spend and there is incentive to put remaining funds to good use—especially if the budget doesn’t roll over into the next year, which is usually the case. However, while a budget doesn’t carry over from one year to the next, losses and capital expenditures can.
Therefore, if you expect to post a profit with your healthcare practice this year, then it may be wise to purchase equipment at the end of this year and then write off depreciation for that equipment over the next few years.
Recent Changes in Tax Law Also Matter
Alternatively, there was a change in the U.S. tax law in 2018, which allows businesses to now write-off the entire value of purchased equipment using the revamped Section 179 tax deduction. This tax law previously established that there needed to be a five-year period for deducting capital expenditures. However, the change has enabled businesses to now claim up to $1M for a single year.
Taking this all into account, it’s easy to understand why equipment manufacturers tend to offer end-of-year deals that are designed to entice healthcare practice owners to purchase medical and dental equipment during December. Ultimately, these manufacturers recognize that there is a small—albeit profitable—window to help healthcare practices capitalize on tax benefits, while also boosting their bottom line in the process.
An Ideal Time to Get Rid of Obsolete Equipment
Every healthcare practice owner realizes that it is necessary to provide best-in-class service to patients in order to ensure they keep returning—and offering referrals. Part of providing best- in class service is guaranteeing you are running your practice with the most up-to-date and technologically innovative equipment. Therefore, December provides a unique opportunity to take a look around your healthcare practice, assess what you are working with, and identify obsolete equipment that needs an upgrade.
Because obsolete equipment usually offers more valuable deductions than damaged or unworking equipment does and optimizes your purchase strategy.
For example, consider the replacement of an old x-ray machine. If the x-ray machine doesn’t work the way it used to, then it is possible to write off a portion of its value when purchasing a new x-ray machine. However, if the x-ray machine is obsolete, then the entire value of the device is tax deductible.
If a healthcare practice owner has great timing, one can pay the deductible expense of discarding the obsolete x-ray machine and the capital expense of purchasing a new device to offset revenues. When done correctly, this can take a significant part of the new device’s costs out of the equation.
Have More Questions?
To be sure, there is strategy required when making a last-minute equipment purchase in the month of December—and the team at LenDRgroup Consulting would love to advise you on ways to maximize such an investment.
We invite you to reach out right now and schedule an appointment. Our team welcomes the chance to speak with you about purchasing equipment as well as loans, financing, and so much more. Schedule a consultation today!