|
|
|
|
|
||||||||
|
   |
|
To own or not to own? That is the medical equipment question At some point, virtually every physician practice must decide whether to buy new equipment or lease it. The correct path will vary, not only among practices but also within practices, depending on a number of factors. The price is just the beginning. Your first consideration should be the cost of all equipment. Generally, equipment with a useful life well beyond the taxable year must be capitalized. But, if you take advantage of the Section 179 expensing election, you can receive a big tax break on your equipment purchases. The maximum Sec. 179 deduction for 2007 is $112,000, and it will be indexed for inflation through 2009. But for tax years after 2009, this amount is scheduled to drop back to $25,000 per year. This is a good incentive to purchase any large-ticket items sooner rather than later. To qualify for the deduction, you have to buy the equipment either out of pocket or with a loan. If total acquisitions in 2007 exceed $450,000, the expensing election begins to phase out. Your budge will determine whether you're better off leasing or buying, but if the cost of the equipment isn't prohibitive, you may get a better interest rate with a loan. For equipment that won't have to be replaced periodically, buying may be the better option.
But if yours is like many practices, the equipment you need may cost more than $112,000. If that's the case, you need to ponder these questions: What if you can't find a bank willing to lend you the full amount? What will you do if the equipment becomes obsolete before you can pay off the loan or fully depreciate it? Or, for that matter, what can you do with a piece of obsolete equipment?
The advantage of leasing For those and many other reasons, many practices choose to lease their medical equipment. There are obvious advantages: The chances of you being stuck with outdated equipment are minimal, and your monthly payments may be smaller than they might be with a loan. On the downside, you may have to come up with a large payment at the end of the lease term if you decide you want to buy the equipment, and your interest rate is probably going to be higher than it would be with a loan. Still, the positives may outweigh the negatives when it comes to leasing medical equipment. For one thing, leasing makes it easy to upgrade or add on to equipment. (Be sure to build in upgrade features when you negotiate the lease.) For another, you can usually get a lease more quickly than you can get a loan, because banks' loan approval processes can be time-consuming. And the value in medical equipment isn't related to owning it; the value comes from using it. Also, leasing allows your practice to obtain state-of-the-art equipment without depleting your capital reserve with a sizable down payment, and you can write off 100% of payments on an operating lease. Different leases for different uses If you decide that leasing is the best option for your practice, you'll need to decide what type of lease works best. Your lease options may include:
The latter generally is the best option for equipment you know you aren't going to want to keep longer than three to five years, but leasing companies may charge more for it. Leasing allows your practice to obtain state-of-the-art equipment without depleting your capital reserve with a sizable down payment. Read the fine print Before signing on the dotted line, make sure you know who's paying the taxes on the equipment and find out whether you can depreciate it. (In some states you can.) Also look to see whether there's an indemnification clause in the lease that saddles you with all legal costs if someone sues. If such a clause is included, demand that it be taken out. Be on the alert for hidden costs, too. Some fair market value leases, for instance, impose a penalty if the equipment isn't worth the remaining lease balance and you don't buy it. Similarly, watch out for "evergreen" clauses. Some companies will automatically renew your lease for six or 12 months if you don't decide to buy the equipment or return it before the lease is up.
Make sense of things In the end, whether you decide to lease or buy medical equipment, your decision likely will come down to your practice's financial condition, the affordability of the equipment and its expected productive lifespan. Whatever you decide, though, it's important that you understand what you're paying for and how long you'll have to keep paying.
|
|
|