Return on Capital is the key to any business investment, or business looking to expand. The new tax laws affecting depreciation of used laser equipment changed in favor of businesses in 2018, but only to those who purchase used equipment. This does NOT apply to the purchase of new lasers.
With the new tax code, 100% of the used laser equipment cost can be expensed in the first year, making capital investments far more attractive than they were just a year ago.
From a practical perspective, what changed?
Reduction of Capital Investment Risk
For Return-on-Capital, the tax changes allow a business to accelerate the RoC significantly, with fewer restrictions.
Previously, a company could expense only part of the equipment cost in year one (up to 50%), and the expense required commensurate revenue. In other words, if a business’s revenues did not at least equal the expansible portion of the cost, you could not take full advantage of the year one deduction.
The previous tax code increased investment risk and added insult to injury. If revenues were less than anticipated, the tax code prevented the company from expensing the investment to the fullest extent.
With the new tax laws, companies can expense 100% of the price of the used equipment, irrespective of revenue.
While revenue risk for the business remains, the tax code sets the ability to expense the equipment at 100% in year one. There is no dependency on revenue, making capital investments more attractive.
Cash Flow Pressure Reduction
Whether starting a new business or expanding services, revenue generation requires time. Equipment is never fully utilized from day one. With 100% equipment deductibility in year one, the cashflow pressure gets a little relief. The new tax code reduces the tax burden related to new equipment.
While the tax code does not increase the cash flow, it does increase what the business gets to keep in year one.
Check with your tax pro
As aesthetic practices plan to expand services or upgrade laser equipment, the 2018 tax code changes will have a positive impact. While these changes are broadly applicable, every business is unique and, as always, should discuss any tax implications with their tax professionals.
What this means to your aesthetic services
If have you put off expanding your aesthetic laser services, now is the time to act. The new tax laws can disappear next year as quickly as they appeared this year. With 100% deductible in 2018, used laser equipment just became significantly more affordable for your business.
There’s more to aesthetic laser sales
While monetary implications are a great factor in purchasing a used laser, there are other important factors. With such an important purchase to your business, make sure that you are working with a complete operating company that provides long term warranties, service contracts, and post-sales support.
Contact Sentient Lasers to find the right aesthetic laser for your service and start generating more business in 2018.