New Tax Breaks for Physician Business Owners

Lawmakers in Washington may still be wrangling over an extension of the Bush tax cuts, but they did manage to provide some needed relief for physician business owners this year. On Monday, President Barak Obama signed into law the Small Business Jobs Act. Although the main thrust of the new law is to expand loan opportunities, it also provides some tax breaks to small businesses, a category that includes many medical practices.

One of the most important provisions is the extension and expansion of the Section 179 write-off. For 2010 and 2011, small business owners can deduct up to $500,000 worth of new or used equipment purchased for a medical practice, instead of spreading out the depreciation write-off over several years. Qualified purchases could include computer systems, hardware and software, and furniture. Taxpayers can also deduct up to half that amount on improvements to their offices, such as remodeling. If you spend more than $500,000, small business owners can also write off half of anything over that amount spent on new (not used) equipment under the “bonus depreciation” rules.

Some physicians may be surprised to learn that the personal use of cell phones in their medical practices was considered a taxable fringe benefit by the Internal Revenue Service -- that’s right, they were supposed to be tracking their cell phone use and paying taxes on it. Under the new law, however, doctors no longer have to do that. Physician landlords, however, will have to give 1099s to any service provider, such as an accountant, gardener, or rental-management service, that are hired in connection with their rental properties.

The portions of the law that deal with small business credit issues sets up a $30 billion fund that will allow the U.S. Treasury Department to invest in independent community banks on the condition that the banks make loans to small businesses. The law also sets up a $1.5 billion grant program to will help individual states create small-business lending programs.

To learn more about the Small Business Jobs Act, click here.