I bought an expensive laser or piece of equipment. How does the write-off work?

The good news is you can likely deduct most or all of that equipment cost in the first year, even if you financed the purchase.

Two provisions in the tax code make this possible. Section 179 allows businesses to deduct the full purchase price of qualifying equipment in the year you place it in service. Bonus depreciation works similarly, allowing a large percentage of the cost as a first-year deduction. The exact bonus depreciation percentage has been phasing down from 100% in recent years, so current rules should be verified for the year you place the equipment in service. For most medical business equipment purchases, one or both of these provisions will let you write off the full amount right away rather than spreading it over five or seven years through regular depreciation.

The part that surprises many owners is how financed purchases work. The deduction happens when you put the equipment in service, not when you pay for it. If you finance a $150,000 laser with a loan, you still get to deduct $150,000 in year one. The loan shows up as a liability on your books and you make payments over time, but the tax benefit happens upfront.

This is where tax strategy matters. A $150,000 deduction does more for you in a year when you have $200,000 in profit than in a year when you have $50,000. If you are considering a major equipment purchase, think about your expected income for the year before you buy. Purchasing in December of a strong year versus January of the next year can change your tax outcome significantly.

The equipment that qualifies includes most tangible property used in your business. Lasers, treatment devices, therapy equipment, and vehicles used for mobile patient care all generally fit. There are dollar limits and income requirements that apply, but most medical business purchases fall well within them.

One more thing to know. If you use equipment for both business and personal purposes, only the business-use percentage qualifies. A vehicle used 80% for mobile patient visits and 20% for personal errands would have 80% of its cost eligible for the deduction.

Working with a CPA for medical businesses before you buy lets you time the purchase and structure things correctly. If you recently bought equipment or are planning a purchase and want to make sure you get the full tax benefit, book a consultation and we can walk through your situation.