How equipment purchases can reduce your taxes: A quick and easy guide for compounders

What if you could give your future self a tax break? What if you could make a decision now that would save your business money later on? As the end of year approaches, now is the time to get in your tax-deductible purchases. For many compounding pharmacies, equipment is a necessary expense that can quickly add up. Fortunately pharmacy equipment is one of those business expenses that can be tax-deductible. Here’s what you need to know to make sure you benefit from equipment tax breaks.

How can equipment purchases reduce my taxes?

According to Section 179 of the United States IRS Tax Code, businesses are allowed to immediately deduct (or write off) from their taxable income the full purchase price of qualified equipment and/or software that is purchased or financed and put into use before December 31, 2024 — the fiscal year-end for most businesses.

We spoke to our financial partners at Independent Rx, a consulting firm dedicated to, among other things, increasing a pharmacy’s profitability. President Owen Bondurant and Tax Director Jim Sunderland both said:

"While tax planning is an all-year exercise, everyone tends to take a more detailed look towards the end of the year. At this time of year, we ask pharmacies we work with what their goals are for the following year. Do they include new technology and equipment? If so, pharmacies should consider purchasing the equipment by November, because the equipment has to be in service by December 31 in order for them to take the Section 179 deduction."

Takeaway here – make sure you purchase your equipment in advance to ensure it is in use before the end of the year and consult with your supplier representatives on lead times.

Can you give me an example of tax-deduction savings?

• My pharmacy’s gross income is $1,000,000.
• My pharmacy’s cost of goods sold and operating expenses (e.g., purchases, office supplies, insurance, and salaries) is $700,000.
• My pharmacy’s taxable income is $300,000 ($1,000,000 - $700,000).
• My pharmacy’s qualified equipment purchases this year totals $50,000. If you buy $50,000 worth of qualifying equipment, you can deduct this full amount under Section 179. This deduction reduces your taxable income from $300,000 to $250,000 (which is calculated as $300,000 minus $50,000).
• By not having to pay taxes on the $50,000 invested in equipment, your pharmacy can save a total of $10,500 based on 21% IRS Corporate Income Tax Rate ($50,000 x 0.21)*. This does not include additional state taxes, which could mean even greater savings.

How soon can I benefit from tax savings?

The shorter the time between the purchase and filing your taxes — the quicker the savings. Purchasing equipment at the end of the fiscal year means you only need to wait a few months until you file your corporate income tax returns on April 15, 2025, to see the benefit.

What equipment qualifies for tax deduction?

The IRS recognizes equipment that will last more than one year and is used at least 50% of the time for business operations. There are some exceptions, and not all equipment may qualify. It is recommended that you consult with your tax advisor for further details.

Is there a limit on how much equipment can be written off per year?

The 2024 Section 179 Deduction Limit is $1,220,000 for the amount that can be written off.

How can I save more with Medisca?

As your Partners in Wellness™, we are committed to delivering you quality and innovation at an unbeatable price. Every year, as the end of year approaches, Medisca runs its biggest equipment sale so that customers can further enhance their potential savings. With up to 35% off** this year’s equipment, (this year’s deal) your pharmacy can invest more for less. From hoods, mixers, capsule machines, molds, balances, ovens, and more – we offer significant savings on an extensive portfolio of offerings.

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How will you utilize your tax reductions? Will you further invest in your business or simply enjoy the savings?

*The tax savings refers to the amount a business would save in taxes by deducting the full equipment cost from their taxable income, which is permissible according to the IRS Tax Code. Note this relates to federal only and is for demonstration purposes only, and should not be relied on as tax advice.

**Limited time offer until December 15, 2024. Terms and conditions apply. Contact your Medisca Account Executive for more details on this promotion.

The content of this webpage is for informational purposes only of a general nature and does not address the circumstances of any particular individual or entity. Nothing contained herein shall be considered financial advice and should not be relied on. You should seek independent financial and taxation advice to validate how the information contained herein relates to your unique circumstances.