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Practices get bigger tax break for equipment purchases

The new law also could make it less expensive to sell a practice or medical assets.

By Katherine Vogt, amednews staff. June 23, 2003.

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If you've held out on buying new computers, medical equipment or office furniture for your practice, your patience has been rewarded.

The new tax cuts signed into law last month include greater off-the-top deductions and depreciation for some capital purchases. For example, a practice that last year could, in a best-case scenario, write off $80,000 of a new $150,000 practice management system purchase could now deduct $130,000 -- a $50,000 difference.

Physicians also could benefit from cuts in income tax rates as well as a cap on the tax rate for dividend income and deductions in the capital gains tax. Not only could a capital gains cut benefit physicians who cash out investments, but accountants say it's also a boon for doctors who sell their practice.

There are caveats. For example, a practice posting a loss would not be eligible for all equipment deductions, and a practice's corporate structure would determine what deductions it would get. But with rising liability insurance premiums, threatened Medicare and Medicaid reimbursement cuts and continued pressure from managed care, the cuts are welcome relief to some physicians.

"At all levels I believe that the tax law changes give us all a certain additional level of comfort that we can spend some money on things that we would have been putting off spending some money on in the past," said Michael Fidler, MD, an orthopedic surgeon in Charleston, W.Va.

Those words would be music to the ears of President Bush, who pushed what would become an estimated $350 billion tax cut program in hopes that it would heat up the economy, particularly through business investment.