Reduce Tax Obligations from PPP Funds by Purchasing Dental X-ray Equipment
2020 was a year unlike any other. With the worldwide Coronavirus pandemic hitting the United States in early March 2020, it’s been one unprecedented change after another. One such change is the Paycheck Protection Program (PPP) that was provided to small businesses, such as dental and dental specialty practices, earlier this year to help practice owners keep their staff on the payroll. But, did you know that dental practitioners that took advantage of the PPP Program can actually reduce their tax obligations from the receipt of PPP funds by purchasing large capital equipment and software, such as dental X-ray equipment, for their practices? Here’s how.
How Does PPP Work?
The CARES Act that was signed into law on March 27, 2020 provided $2.2 trillion to citizens and businesses throughout the United States. Part of the CARES Act is the Paycheck Protection Program (PPP) which aimed to provide small business owners with the funds they needed to continue paying their employees even if they had to close their doors. This was described as a loan to be forgiven if the funds are used according to the established rules. However, under the Internal Revenue Code, expenses paid with forgiven loan funds are not eligible for deductions on business tax returns.
Take this example: A dentist receives $100,000 in PPP funds to continue payroll for 24 weeks, as intended by the law. However, the payroll can’t be deducted on the practice tax return. Now, if the practice has an effective tax rate of 30%, this dentist can expect to pay $30,000 back to the government when filing taxes.
4 Things to Keep In Mind
If your practice was granted a PPP loan and is now faced with additional tax obligations, here are a few things to keep in mind.
- 1.Try to focus on the bright side of the PPP funds instead of the potential tax risks.
- 2.Educate yourself on the tax impact of receiving the PPP funds.
- 3.Plan to have cash available to pay your taxes at the end of the year.
- 4.Don’t miss out on tax planning opportunities to minimize your tax impact.
How to Make the Most of PPP Funds
Have you heard of Section 179? This is a tax deduction for small businesses that allows them to write off the entire purchase price for new or used capital equipment, up to $1,040,000. How does this work with PPP? Here’s an example:
Let’s say you want to purchase $70,000 - $100,000 of dental X-ray equipment to upgrade your practice. With the PPP funds being disallowed for payroll deductions, you’re looking at paying an extra $30,000 in taxes come tax season. However, if you leverage the purchase price of the equipment with the Section 179 tax deduction, you can reduce your tax obligation to a fraction of that amount. Simply offset additional taxes owed by adding digital or cone beam dental X-ray equipment to your practice! It’s a win-win!
Let Renew Digital Help!
Now is the perfect time to invest in your practice and take advantage of PPP funds and the added benefits of Section 179 tax savings. Here at Renew Digital, we can work with you to find the best dental X-ray equipment for your practice and make the most of your PPP funds and Section 179 tax deduction opportunities. Please contact us today by calling 888-246-5611 or reaching out online. Our Sales Representatives are available to help you understand your benefits and add quality pre-owned digital dental X-ray equipment to your office!
