Taking advantage of year-end CapEx equipment spending for chiropractic practices

CapEx equipment expenditures can vary depending on where you are in your chiropractic career …

You want — or need — new equipment for your chiropractic practice. Yet, you haven’t planned for allocating for it until next year. But did you know you can also buy it in the fourth quarter of this year and use it as a write-off for CapEx equipment the upcoming year? This is due to your business equipment possibly falling under the category of capital expenditures, also known as CapEx.

What are capital expenditures (CapEx)?

Capital expenditures are expenses paid to purchase, maintain, or update a company’s long-term physical assets. These assets can be property or building-related, but they also include technology or equipment. “Long-term” is the keyword when it comes to CapEx equipment expenditures. If the asset is useful for more than a year, it likely falls in the CapEx category.

Instead of being fully expensed in the calendar year that it is purchased, the cost of capital expenditures can be spread over numerous years, or as long as the asset is considered useful. A CapEx is not a direct tax deduction, but an indirect way to reduce a company’s tax payout through the depreciation of a long-term asset.

Three categories of CapEx equipment expenditures

The Internal Revenue Service (IRS) indicates that capital expenses can fall into one of three categories:

• Business startup costs, in which case the IRS suggests that you “treat all costs you had to get your business started as capital expenses”
• Business assets, such as land, physical buildings, furniture, and franchise rights
• Improvements, whether to make an asset better, restore it, or adapt it for a different use

Examples of chiropractic CapEx

CapEx equipment expenditures can vary depending on where you are in your chiropractic career. If you’re just starting out, for example, you may have to purchase the property or building where you plan to practice. You also likely have to buy all the equipment needed to offer chiropractic services, some of which include tables for making adjustments, diagnostic devices such as an X-ray machine, and office equipment like computers and servers.

Practitioners with established businesses would likely have more capital expenditures geared toward making improvements or performing simple maintenance. Examples include adding on to your practice to have more exam rooms, updating the roof or the heating and cooling system, or replacing old chiropractic equipment that is outdated or no longer works.

Using Q4 capital expenditures to your advantage

Practitioners can use CapEx to their advantage in a few different ways. One is to deduct the expense over time, providing small tax advantages over the tax years that the asset is considered useful. Another option is to deduct the entire expense all at once, providing a greater advantage during the current tax year. This option is possible under Section 179.

As of this year, businesses can deduct a maximum of $1,080,000 under Section 179. This is an increase over last year’s maximum Section 179 deduction of $1,050.00.

If property placed in service during the 2022 tax year exceeds $2.7 million, the max deduction is reduced by any cost that exceeds this amount. If you provide mobile chiropractic services and, therefore, plan to expense a new sport utility vehicle, the maximum deduction for this expense is $27,000.

Consult your tax professional

The laws governing CapEx are both lengthy and complex. And they change often, requiring that you stay updated to avoid issues with the IRS. Working closely with your tax advisor can help ensure that your capital expenses are above board and in compliance with current regulations. This professional can also help you decide how to best write off these expenses.

Talk with a tax professional before the end of the year to discuss your equipment needs for the coming year. Consider any equipment that you intend to purchase to replace outdated pieces, expand your practice into other areas, or offer additional services.

Based on your current tax status and upcoming equipment needs, your tax advisor can make suggestions about how to best maximize these CapEx equipment expenditures. This provides the ability to get the devices you need to build or grow your practice in the year ahead, writing off this equipment in a way that provides the greatest benefit.