There are tax changes that came into effect in 2013 where more than just the wealthy may feel the impact. There are new phase outs for itemized deductions. You no longer benefit from the entire amounts. Personal exemptions are also phased out for a deduction. Trying to push income below these thresholds will save tax deductions. A veterinary CPA can help you understand how to use the current tax law, with all its changes, to minimize tax burdens and build financial wealth. Many times it’s all in how you structure an event and avoid the landmines.

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Practice sales are strong with baby boomers seeing a better market. More corporate consolidators are also purchasing practices. Capital gains rates have risen for those who will have $400,000-plus of income (single); $450,000-plus (married, filing jointly). The increased tax rates have not slowed sales. The new strategy is to keep the yearly  income level below the income threshold for increased tax rates by utilizing installment sales where the capital gains are spread out over the collection period of owner provided financing.

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What remained a strong tax deduction for practice owners is the 179 expensing election for new equipment purchases and 50% bonus depreciation. These purchases can be very effective in reducing the overall taxable income of a practice owner especially in the higher tax brackets. A veterinary accountant can help you learn the criteria that should be utilized when making an equipment purchase decision.

Veterinarians should consider keeping up with technology to meet current standards of care in medicine. It’s important from the business side of medicine to maintain the income stream, stay competitive and retain the practice value. Most people who keep up-to-date with reinvestment in their veterinary practice equipment related to the bigger ticket items are looking at digital X-ray units, dental digital X-ray units, in house lab equipment and Class 4 laser units for treatment of arthritic conditions and wound care. 

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Many veterinarians need to think about how to invest in their surgical areas since many practices are experiencing income declines due to low cost spay and neuter clinics, non-profits doing surgery  and specialty centers taking surgery income out of practices. Owners that saw 8 to 10% of their income from surgery now see it at 3 to 4%. It’ll be difficult for practices to maintain profitably in the surgical suite if they spend heavy here and don’t have a lot of volume. Having a good surgical suite with state-of-the-art monitoring equipment will be good for many.

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Many practices have put off computer upgrades because of the down economy. It may be necessary to upgrade and invest in computer hardware and software to maintain your practice. Software upgrades require that practices invest in new hardware to maintain the availability of information to conduct day-to-day business and provide adequate medical attention for patients. Only about 20 to 25% of practices are paperless. Continued movement in this direction as a generational shift will require more investment in computer hardware and software technology.

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