Running a medical office is an expensive effort. It’s a labor of love, of course, but a costly one – with a million different kinds of practice expenses falling into dozens of different accounting buckets.
But with so many expenses come many opportunities for tax deductions – even among the smallest drops in each bucket. But in the day-to-day operation of a medical practice, many deduction opportunities are inadvertently overlooked.
Hopefully your practice has a trusted tax attorney and/or CPA on hand helping you navigate tax time (and if not, we encourage you to find one). But as you file your returns this year, we encourage you to keep an eye out for every possible deduction, including those in our (non-exhaustive) list provided below.
Note: What follows is general information that should not be considered tax advice.
Write off salaries for both physicians and staff.
Rental and lease expenses
Meaning both equipment rentals and office rent payments.
Most office owners know they can deduct mortgage interest, but don’t forget that condo expenses (like monthly maintenance and management fees) can also be written off.
Business development expenses
It’s not just travel costs – spending on marketing- and advertising-related efforts also fall under the business development umbrella.
Medical and office supplies
In addition to writing off the usual items, be sure to deduct any payments for equipment repairs or maintenance.
Among potential writeoffs: The employer portion of health insurance; premiums for group life insurance, and workers' compensation; seminar costs for CME and for staff training; employee recruitment expenses; and employer contributions to 401(k) or other retirement plans.
Like wifi, magazine subscriptions, and many various dues are also deductible, as are gifts up to a maximum of $25 per person.
A commonly missed deduction, covering any renovations or improvements to a leased space.
Premiums for malpractice, property, and liability insurance are deductible.
Employer-paid taxes on staff, as well as taxes on property, personal property, and business licenses, can be written off.
Payments for accounting, electronic billing, legal and payroll services, postage and delivery, and professional consultants are all deductible.
And to make tax time as trouble-free as possible, don’t forget the basics – namely, that all of the above expenses should be “ordinary and necessary,” as deemed by the IRS.
And above all else, the most important tax dictum is to keep all documentation… always! As part of an audit, the IRS can demand copies of invoices and receipts for all expenses incurred, as well as credit card statements and copies of checks or other forms of payment. For equipment and furniture purchases, the IRS would want to see documents showing proof of ownership of equipment and related loan or financing documentation.
Good financial practice (beyond just medical billing) is of growing importance to every medical practice. This tax season, cover all your bases and make sure you have expert help on hand!
...and if you need help from a medical billing company...