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BUSINESS
NEW DEPRECIATION RULES:
Write-offs everywhere you look
By Bennett Allison, CPA, CFP
Starting in 2016, the IRS changed the rules for the capitalization The tax result under the new safe harbor rules for
and depreciation of fixed assets with the introduction of Notice 2016 is as follows:
2015-82. For many businesses, this change both simplifies record
keeping and provides the opportunity to accelerate income tax de- • $60,000 expense for the chairs
ductions. • $15,000 expense for the work stations
• The exam tables will have to be capitalized, but all $45,000 can
Notice 2015-82 provides for a $2,500 de minimus safe harbor
election. This election allows taxpayers to expense asset purchases be taken as a current year expense under Sec. 179 up to $500,000
up to $2,500 per item, per invoice starting January 1, 2016. For ex- • The MRI machine will have to be capitalized. $455,000 can be
ample, a doctor’s office spends $60,000 for the purchase of thirty
new computers for all of its employees. At $2,000 each, the pur- taken as a current year expense under Sec. 179 to reach a total of
chases fall under the $2,500 de minimus per item, per invoice limit. $500,000. Of the remaining $20,000 ($475,000 - $455,000),
Accordingly, this purchase does not get considered for capitalization $10,000 can be taken as an immediate deduction under 50%
and depreciation purposes and instead $60,000 is taken immediately bonus depreciation. The remaining $10,000 is depreciated over
as a deductible expense. 5 years.
There are two caveats to keep in mind when applying the de min- In the scenario above, $595,000 of assets are purchased with a re-
imus safe harbor. First, the $2,500 safe harbor must be applied for sulting current year write-off of $587,000 (an extremely favorable
both internal book financial statement reporting and for external tax result).
tax reporting. Second, the taxpayer must have a capitalization policy
in place for the $2,500 expensing. Medical practices should definitely look at whether they are taking
advantage of the new
The new rule is significant in that small to medium sized busi-
nesses will find in most situations that they can immediately write- $2,500 expensing rules under Notice 2015-82. This will involve
off almost all asset purchases when combining it with existing both adopting a capitalization policy and then informing office per-
provisions such as the Sec. 179 deduction and 50% bonus depreci- sonnel about the new expensing rules to ensure they are properly
ation. For 2016 and 2017 (assuming no law changes affect 2017), applied. Between this new rule and existing depreciation provisions
most medical practices should be able to write off assets purchases such as Sec. 179 expensing and 50% bonus depreciation, the op-
on the $2,500 per item, per invoice basis, then expense items such portunity to purchase assets and get an immediate tax write-off is
as furniture, machinery, and equipment up to $500,000 in total better than ever.
each year, and finally take 50% bonus depreciation on original use
items (i.e. not used items) such as furniture, machinery, equipment, Bennett Allison, CPA, CFP™ is a shareholder at Sol
and certain leasehold improvements. The application of these rules Schwartz & Associates, P.C. (cba@ssacpa.com). He has over
are applied in the following example: ABC Physicians purchased 21 years public accounting experience serving individuals,
and placed into service the following asset in 2016: 100 chairs at a corporations, S-corporations, partnerships, trusts, estates, and
cost of $600 each, 10 work stations at a cost of $1,500 each, 10 non-profit organizations. In addition, Bennett works with a high con-
exam tables at a cost of $4,500 each, and 1 new MRI machine cost- centration of physician practices and high net worth individuals. Con-
ing $475,000. tact Bennett at (210) 384-8000 Ext. 138.
36 San Antonio Medicine • July 2017
