Tax law is constantly changing. With each administration, the structuring and loopholes in the current wording are often changed. There are some tax write-offs that continue to be the standard while others change from year to year. It is vital for veterinarians to stay current on the changes and to continue to reduce income tax through the use of legal, valid tax deductions.
What Can I Claim?
The typical tax write-offs for small businesses apply to veterinarians as well. These include such items as building maintenance costs, utilities, office supplies, medical supplies, salaries and wages, depreciation, website expenses, dues and subscriptions, employee benefits, computer software, taxes, equipment rental and more.
However, some new tax laws have changed considerably and now include a new income tax deduction. In August of 2018, the IRS released information on proposed guidelines on the Tax Cuts and Jobs Act of 2018. At first it was unclear if veterinarians would be included as ‘health services’, but this has now been defined.
Because of this legislation, there is a new 20% deduction of qualified business income on a pass-through deduction now available for licensed veterinarians who have their own business. This tax write-off is available for sole proprietorships, partnerships, trusts and S-Corporations as defined under Section 199A of the tax code. There are income restrictions of $315,000 for those filing jointly and $157,500 for individual filers. However, the deduction does not end but phases out for those between $315,000-$415,000 for joint filers and $157,500-$207,500 for those filing individually. The phase out will be determined by a formula provided by the IRS.
New tax reform has also changed the tax rate for C-corporations from 35% to 21%. It may be advantageous for veterinarians to consider this type of entity under the new laws. Although, there are some circumstances where this might not be of benefit so discussing this possibility with your accountant and attorney is advised.
There are also some changes in depreciation and Section 179 allowances. Hospitals with equipment placed in service starting September 27, 2017 to January 1, 2023 will be allowed to claim a $1 million deduction on Section 179 qualifying property. This category has been expanded to include qualified improvement property as well as designated improvements made to nonresidential real property. The phase out is at $2.5 million. Vehicles weighing over 6,000 pounds are also now eligible for immediate deduction.
Trust The Chandler & Knowles Team
The vast number of tax changes over the last two years makes it difficult to stay in line with the maximum deductions while maintaining accurate, error-free accounting. Let Chandler & Knowles, CPAs assist you with navigating the new laws and changes to keep your veterinarian business in compliance. Contact us today to get started.