Dentistry is changing and a growing consumer demand for extreme makeover smiles is driving the market for dental technology that once seemed futuristic and out of reach as little as five years ago. With this shift, laser systems, digital radiography equipment and CAD/CAM equipment are replacing drills as the "must have" tools of the trade.

With cosmetic dentistry procedures on the rise and state-of-the-art offices becoming mainstream, a growing number of dentists are seeing the pay-off potential for the large investments needed to transform their drill-and-fill practices into high-tech, cosmetic dentistry centers. More might be willing to plant both feet in the 21st century if they realized the pay-off for their investments could happen sooner than they thought -- by taking advantage of the tax and cash flow benefits they would gain if they chose to finance their high-tech equipment purchases over five to seven years.

By spreading out payments rather than paying cash upfront and maximizing tax deductions, dentists could actually boost their cash flow while their new equipment generates more income and/or greater efficiencies for the practice. In essence, under the relatively new guidelines of Section 179 this new equipment could end up paying for itself and more in a short period of time.

Understanding Section 179:

While dentists understand the benefits to their patients and their practice’s from owning new-age dental equipment, they often overlook the tax and cash flow benefits that they themselves can gain -- especially if they choose to finance the equipment purchases over five to seven years. By spreading out payments rather than paying cash upfront and maximizing tax benefits, dentists can boost their cash flow as the new equipment generates more income and/or greater efficiencies for the practice.

When President Bush signed the Iraq Bill on May 25th 2007 it included an updated provision for Section 179. Small business will benefit under the new law because Section 179 of the tax code currently allows buyers to claim an immediate first year deduction for up to $125,000.00 -- that’s up from $112,000 in early 2007 – for up to a $500,000.00 worth of new equipment. This threshold represents the maximum dollar amount of equipment that can be purchased each year before the write-off is reduced dollar for dollar.

For example, a dentist who purchases $200,000 in equipment can deduct $125,000 of the cost based on Section 179, leaving a balance of $75,000. Under the current tax laws, a dentist could also realize an additional 20% depreciation during the first year the equipment is placed in service ($75,000 – 20%). The remaining $60,000 in equipment cost can then be depreciated over the remaining years, depending on the equipment.

As is always the case with tax deductions, these are not automatic. A taxpayer must elect to take them. Also, these benefits only apply to purchases and financed purchases; lease agreements are not eligible.

For any dentist considering a major capital investment, the tax benefits provided by Section 179 are too good to pass up. Couple this with the increasing demands and expectations among patients to see the latest technology in their dentist’s office, creating a state-of-the-art office, while taking advantage of these generous tax benefits, could be a smart move.  Jason Schneller