Can a dental or medical practice deduct new equipment in the year it is purchased?
Often the full cost, yes. Two provisions accelerate it. Section 179 lets a business elect to expense the cost of qualifying equipment immediately, subject to an annual dollar cap, a spending phase-out, and a limit preventing the deduction from exceeding taxable income from the business. Bonus depreciation under Section 168(k) applies automatically to qualifying property unless the business elects out, and unlike Section 179 it can create or increase a loss. Following Public Law 119-21, the allowance is 100 percent of the adjusted basis of qualified property acquired after January 19, 2025 (Section 168(k)(1)(A)); property is not treated as acquired after the date a written binding contract for it was entered into, so equipment bought under such a contract signed on or before that date stays under the prior phase-down percentage for the year it is placed in service (Public Law 119-21, Section 70301(c)), while Section 179 expensing remains available for it in that year, within the limits above (Section 179(a)). Both require the asset to be placed in service during the tax year. A more-than-50% business-use test is not a general condition of bonus depreciation: it conditions Section 179, whose benefit is recaptured if the property stops being used predominantly in a trade or business, and it governs listed property such as vehicles, where business use of 50% or less forces the slower alternative depreciation system. The annual Section 179 dollar limits are indexed for inflation and should be confirmed for the specific year against IRS Publication 946.
What is the difference between Section 179 and bonus depreciation?
Section 179 is elective and applied asset by asset, so a business can expense exactly the assets it wants and depreciate the rest, useful for controlling income to a target. It is capped in dollars, phases out once total equipment purchases for the year exceed a threshold, and cannot push the business into a loss. Bonus depreciation is not elective in the same way: it applies to whole classes of property automatically unless the business affirmatively elects out for that class, it has no dollar cap or income limitation, and it can generate a loss. When both apply, Section 179 is taken first, bonus depreciation next, and ordinary MACRS depreciation on whatever remains.
Does financed or leased equipment still qualify for a deduction?
Financed equipment qualifies in full. The deduction depends on when the asset is placed in service, not on how or when it is paid for, so a practice that finances an operatory in December and installs it in December can generally deduct the qualifying cost that year even though almost nothing has been paid. Leases are different and depend on the lease terms: a capital or finance lease is treated as a purchase and depreciated, while a true operating lease produces a rent deduction spread over the lease term instead.
What does "placed in service" mean for equipment?
Placed in service means the asset is ready and available for its intended use (installed, assembled, and operational), not merely ordered, delivered, or paid for. A chair that arrives on December 28 but is not installed and usable until the second week of January is a next-year asset, and its entire deduction moves to the next year. For equipment bought near year end, the installation date is the fact that controls the deduction, which makes the installer's schedule a tax planning item.
Can a practice deduct a vehicle?
A vehicle is deductible in proportion to its documented business use, and it is listed property, meaning the substantiation standard is higher than for other assets: a contemporaneous mileage log separating business from personal miles is the expected evidence. The vehicle's weight matters: passenger automobiles are subject to annual depreciation caps that sharply limit first-year deductions, while heavier vehicles fall outside those caps and can qualify for much larger first-year write-offs. That 6,000-pound line is measured by unloaded gross vehicle weight, or by gross vehicle weight rating in the case of a truck or van. Section 179 then imposes its own separate dollar cap on sport utility vehicles, which for this purpose means a four-wheeled vehicle rated at not more than 14,000 pounds gross vehicle weight that sits outside the passenger-automobile caps. Certain vehicles are excluded from that definition, including one equipped with a cargo area of at least six feet of interior length that is open, or capped and not readily accessible from the passenger compartment, so a heavy pickup with a full-length bed can fall outside the cap entirely. Confirm the current cap amount and whether a specific vehicle meets the definition (Section 179(b)(5)). Business use of 50% or less disqualifies accelerated methods entirely and forces straight-line depreciation.
What happens tax-wise when the equipment is sold or traded in?
Depreciation recapture applies. Under Section 1245, gain on the sale of equipment is treated as ordinary income to the extent of the depreciation previously claimed, including any Section 179 expensing and bonus depreciation, rather than as capital gain. The practical effect is that accelerating a deduction moves tax rather than eliminating it whenever the asset is later sold for more than its remaining basis, which is a common surprise when a practice upgrades imaging equipment or sells at retirement.
General educational information about United States federal tax rules, current as of the review date above. Tax law changes and every situation turns on its own facts. This is not tax, legal, or financial advice and does not create a client relationship. Inflation-adjusted figures should be confirmed for the year in question before relying on them.
