Important 2009 Income Tax Tip

Reduce your 2009 Income Taxes by 30%-40% of Cost of EMR and qualify for $44,000 in HITECH Payment; receive double savings for the buck.  Act by end of the year.

 TAX CODE 179- Made Simple

Practices may immediately depreciate (expense) up to $250,000 on their 2009 Tax Return.

-  Most practices try to avoid paying income taxes. Tax Code 179 helps you do so.

-  Practices can expense the full cost (up to $250,000) of their equipment/software purchased by 12/31/09.

-  If you buy $50,000 worth of equipment/software, you can expense the full $50,000 to reduce your taxable and self employment income.

-  Assume taxable income is $200,000 with effective combined tax rate of 35% prior to using Tax Code 179. 

-  Now with the $50,000 expense, the taxable income is only $150,000 and out of pocket taxes have been reduced by $17,500!

-   Plus, be in line to qualify for $44,000 in HITECH stimulus payments per physician.

-   Any amount purchased over the $250,000 limit can typically be depreciated under the 2009 50% Bonus Depreciation system.

You can get the full Tax Code 179 savings in 2009, and not start paying for the equipment/software until the year of Stimulus Payments.

-  Our finance company will pay any down payments/deposits to GroupOne to get the equipment ordered and get scheduled for training & implementation.

-  We could have your system ordered and potentially up and running in 2009 which should satisfy Tax Code 179 criteria.

-  Use our financing company’s special deferred Stimulus Financing Plan.

-  You receive the Tax Code 179 tax savings on your 2009 tax return and don’t start making payments until the year stimulus payments start.

Tax Code 179 reduces the effective cost of your equipment or software solution

-  Your equipment/software proposed cost is $50,000

-  Your assumed tax rate is 35%

-  $50,000 in Tax Code 179 write offs equates to $17,500 in 2009 income tax savings ($50,000 * 35%)

-  You just saved $17,500 in actual income taxes through Tax Code 179

-  Therefore, the net tax cost of the proposed $50,000 project is $32,500 ($50,000-$17,500= $32,500 or a 35% savings on the cost of the system).

Tax Code 179 has been available to practices for several years; however, any unused annual amount does not roll over to the next year. 

After 9/11, Congress temporarily inflated the Tax Code 179 cap from $25,000 with the hope of “jump starting” the economy. Under the various stimulus plans, the inflated amount has been approved for 2009 with no guarantee of how long it will remain.  

HITECH Stimulus Payment of $44,000 – The Time To Act is Now.

If you and your practice do not currently utilize a reputable EHR, the TIME TO ACT IS NOW!  While it is true that the stimulus payments are not scheduled to begin until 2011, the window for qualifying to receive the maximum payments will close quickly for several reasons.  

First of all, to qualify for the incentive payments you must demonstrate “meaningful” use of a certified EHR.  Purchase and implementation are not enough.  The transition to a new EHR system can be a timely process when you include the following steps:  evaluate your workflows, develop your selection criteria, select a vendor, develop your implementation plan, install your EHR, connect to other providers and have your physicians fully functionally.  Typically, the time requirements of the steps increase in proportion to the size of the group.  If you haven’t started the process, 2011 is a lot closer than many would like. 

Next, if you do not act before the “masses” you may have a difficult time getting on any vendor’s implementation schedule in the near future.  As indicated earlier, only 20% - 30% of the market has implemented an EHR system.  The Congressional Budget Office predicts 90% of physicians will be using an EHR in a matter of just a few years.  That means 60% to 70% of the market is going to try to get implemented in the next several years.  Even prior to the Stimulus Act, some vendors had waiting lists up to 6 months.  Those physician who wait, may have little chance of qualifying as an early adopter.

Furthermore, great opportunities are already in place and physicians should take advantage of them now.  Besides the many cost saving opportunities and positive ROI traits inherent in an EHR, CMS has current incentive programs in place (PQRI and electronic prescribing) that could generate $6,000 - $8,000 / physician / year.

If you have any questions, please contact us and we will do our best to help.

If you are ready to get started – We can help.

As each entity or individual situation is different, please contact your tax advisor regarding such matters. This information represents GroupOne’s interpretation of the various issues presented and should not be considered legal or tax advice.  It should be used for informational purposes only.