How to Leverage Section 179 to Save Big on Pharmacy Taxes

Did you know you can trade some of your pharmacy’s tax bill for new technology?

There’s still time to take advantage of the Section 179 tax deduction, which allows you to deduct up to $500,000 in qualifying equipment from your 2016 tax return when you purchase and install this calendar year.

Investing in pharmacy automation technology is a great way to increase your pharmacy’s efficiency and differentiate your business through innovative, valuable services — and to decrease your tax bill by tens of thousands of dollars.

Here are some of the most common questions we get from pharmacy owners about the Section 179 deduction.

What is the Section 179 deduction?
Section 179 is a tax incentive that allows businesses to deduct the full purchase price of qualifying equipment in the year it’s purchased, regardless of whether the equipment is financed or leased. Section 179 is one of the biggest deductions available to businesses. It was created to encourage small businesses to invest in themselves.

Does Parata technology qualify for Section 179?
Absolutely, Parata technology will qualify for the Section 179 deduction. By taking advantage of this tax break, you can effectively lower the cost of new Parata technology.

Can I lease and qualify for Section 179?
Yes! In fact, Section179.org says using the Section 179 deduction with a lease “might be the most profitable decision you make this year.” That’s because the amount you can deduct will almost always exceed the payments you will make in that year.

How much can I save?
This depends on how much qualifying equipment you purchase, but the maximum Section 179 deduction is $500,000. Here’s an example of how the Section 179 incentive could impact your tax savings and effective purchase or lease price.

 

What’s the difference between Section 179 and Bonus Depreciation?
If your qualified purchases exceed the Section 179 cap — currently set at $500,000 — bonus depreciation may help you save even more on your taxes. Bonus depreciation is an accelerated depreciation method. It allows a business to deduct 50 percent of the cost of qualifying new equipment in the same year it’s put into use.

When is the best time to purchase?
To qualify for the deduction, equipment must be purchased and installed during the 2016 calendar year. Make sure to account for implementation and delivery times when you’re planning.

If you’re leasing the equipment, you may reap the maximum tax benefit by beginning your lease later in the calendar year. While you may make just one or two lease payments before the year ends, you can still deduct the entire cost of the equipment that’s recorded on your books the first year.

How do I elect the Section 179 Deduction?
Before you file your tax return next year, make sure your tax advisor is aware you made a qualifying purchase. They’ll be able to help you elect the Section 179 deduction by filling out IRS form 4562. You’ll need to have the paperwork from your qualifying purchase or lease handy.

Where do I learn more?
Your tax advisor will be the best source for information specific to your business. You can also check out these sources we use to stay informed about Section 179:
section179.org
thebalance.com
fitsmallbusiness.com

What do I do next?
We encourage you to consult with your tax advisor and go over the details to determine how Section 179 will impact your pharmacy’s cash flow and bottom line.

In the meantime, reach out to us at success@parata.com. We’ll help you get started finding the right technology solution for your pharmacy so you have plenty of time to take advantage of the Section 179 incentive.

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