Offering employee benefits is a necessary part of doing business; it is especially important in competitive job markets. But for many employers, the process of selecting, implementing and administering a benefits program is overwhelming and time-consuming. There are over 7.4 million employers in the U.S., and the majority (82%) have fewer than 200 employees. Yet as a nation made up largely of small employers, it can be difficult to compete with larger businesses – and larger budgets – for top talent.

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As we move through the last two months of the tax year 2017, it is time to start thinking about tax planning for your veterinary clinics and hospitals. As Congress is still working on tax reform, there will likely be major tax change coming soon. However, it is anticipated that any changes will not be retroactive, therefore mostly impacting 2018 taxes and not 2017. Nearly all taxpayers are expected to be affected by the proposed changes. In the absence of clarity and certainty, it is important to strategize for 2017 and to plan for deductions, credits, and tax opportunities that are available now.

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vha cbiz veterinary taxHeading into the 2016 tax filing season, we are faced with fewer unknowns than in prior years. With the passage of the Protecting Americans from Tax Hikes (PATH) Act of 2015 on December 18, 2015, many of the more common business tax provisions were either made permanent or extended out for two to five years. Some of the tax provisions were even enhanced to become more taxpayer friendly.

As you close out your veterinary hospital or clinic's 2016 books and records and complete your 2016 tax return(s), here are some notable tax strategies to keep in mind when you consult with your tax advisor:

  • Section 179 expensing allows businesses with taxable income an immediate write-off, up to $500,000, on the purchase of qualified new or used property (i.e. - furniture, equipment, off-the shelf computer software, qualified real property, etc.). The deduction begins to phase-out when qualified purchases exceed $2,010,000 (adjusted for inflation).

  • Bonus depreciation allows businesses an immediate 50% write-off on the purchase of qualified property. Qualified property generally includes new tangible personal property, off-the-shelf computer software and qualified improvement property. Note that the property must be new.

  • De minimis safe harbor election allows businesses to deduct expenses for tangible property that they would have otherwise had to capitalize. For businesses with audited financial statements, the de minimis safe harbor threshold remains at $5,000 per item or invoice. For businesses without audited financial statements, the de minimis threshold was increased from $500 to $2,500. To take advantage of the de minimis safe harbor, there must be an accounting policy in place, as of the beginning of the tax year. Businesses must also follow this capitalization policy for their financial statements. This is an annual tax return election, made by attaching a statement to a timely filed original federal income tax return (including extensions).

  • Cost segregation study - do you own real estate that you are looking to renovate or build-out? You should consult with your tax advisor about the advantages of doing a study to identify assets of the building that could be classified as tangible personal property and depreciated at accelerated rates, over a shorter time period.

  • Choice of entity - have you chosen the right form of business entity? With the new administrations tax proposals speaking to lowering tax rates for businesses, you should consider revisiting the type of entity your hospital or clinic is operating under.

  • Succession planning - have you thought about succession planning? The wrong decision or even the right decision implemented the wrong way can be catastrophic to the survival of your business. What happens with your business has huge emotional and economic ramifications to you, your family, employees and patients. It is never too early to start this process.

Also notable, recently enacted tax law has changed the due dates for certain tax returns this year. Some of the more significant deadline changes include:

Return Type Under Prior Law Tax Year 2016
Partnership Form 1065 April 15
September 15 (extension)
March 15
September 15 (extension)
C Corporation Form 1120 (calendar year end) March 15
September 15 (extension)
April 15
September 15 (extension)
C Corporation Form 1120 (6/30 year end) September 15
March 15 (extension)
September 15
April 15 (extension)

In addition to preparing for the 2016 tax filing season and considering the above strategies, it is important to keep in mind the likelihood for comprehensive tax reform for tax year 2017 and beyond. You should be patient when making important tax decisions for 2017. Steer away from entering into any major transactions based on what the tax law might be. To the extent possible, delay any major changes until tax legislation is passed. Consult your tax advisor when you are considering these decisions.

Veterinary Hospitals Association partners with CBIZ MHM, LLC to provide a variety of supplementary business services to our members. To talk to a tax professional about your clinics' finances, contact your Inside Account Representative today.
Not a VHA member? VHA can provide your veterinary clinic with valuable group purchasing discounts, reliable and ethical cremation, experienced business services, and quality continuing education. Learn more here and become a member today!


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