What Dental Practices  Need To Know About The Chinese Tariffs, The Section 179 Deduction & Windows 7 End Of Life

If you’ve been considering making changes or upgrades to your business technology there 3 important things that you should know:

  1. The tariff’s that were put into place in September have caused some technology suppliers to increase prices by 10%. Now with the Chinese tariffs going into effect on January 1, 2019, you could face another increase in prices to the tune of 25%.
  2. If you want to be eligible for a Section 179 deduction, the dental technology you purchase must be placed into use by December 31st, 2018.
  3. With the Windows 7 End Of Life approaching, now is the perfect time upgrade to Windows 10. The same goes for Windows Server 2008 End Of Life. If not, you’ll be left without the support and security patches you need.

What Dental Practices Need To Know About The Chinese Tariffs

According to the United States Trade Representative (USTR), about $200 Billion of imports from China will be subject to the additional tariffs.

Unfortunately, China isn’t changing its policies of unfair acquisition of U.S. technology and intellectual property. Instead, of doing this, they responded to the United States’ tariff action by taking further steps to harm U.S. workers and businesses.

Because of this, the President directed the USTR to increase the level of trade covered by the additional duties to 25% in order to eliminate China’s unfair policies.  The Administration will continue to encourage China to promote fair trade with the United States. We all hope this will happen before January 1st but so far, these Chinese haven’t budged.

What Happens If The Chinese Don’t Change Their Policies?

The Consumer Technology Association (CTA) estimates that a 25% tariff on printed circuit board assemblies (a critical component for the servers) would increase in price by more than 6 percent and reduce consumption by nearly 12 percent in 2019.

This will also affect connected devices like routers, modems, and products like the Internet of Things (IoT)-based devices.

This means that many businesses will be forced to choose between forgoing these technology purchases or paying the price and cutting back on other things like new projects or hiring more employees.

Here’s a list of products that will be affected by the 25% increase in Chinese tariffs. (from Data Center Dynamics)

“nesoi” means Not Elsewhere Specified Or Indicated

  • Fans used for cooling microprocessors, telecommunications equipment, or computers
  • Power supplies suitable for physical incorporation into automatic data processing machines
  • Power supplies for automatic data processing (ADP) machines or units
  • Static converters (for example, rectifiers) for telecommunication apparatus
  • Other inductors for power supplies for ADP machines… or for telecommunication apparatus
  • Printed circuit assemblies of power supplies for automatic data processing machines
  • Nickel‐iron storage batteries
  • Ignition magnetos, magneto‐dynamos and magnetic flywheels
  • Generators nesoi, of a kind used in conjunction with spark‐ignition or compression‐ignition internal‐combustion engines

Servers and Storage:

  • “Processing units” [defined as servers by trade body TechNet]
  • ADP magnetic disk drive storage units, disk dia. ov 21 cm, w/o read‐write unit; read‐write units; all not entered with the rest of a system
  • ADP magnetic disk drive storage units, disk dia. ov 21 cm: for incorp. into ADP machines or units, not entered with the rest of a system
  • ADP magnetic disk drive storage units, disk dia. n/ov 21 cm, nesoi, not entered with the rest of a system
  • Control or adapter units for automatic data processing machines not entered with the rest of a system
  • Unit suitable for physical incorporation into an automatic data processing machine or unit thereof, not entered with the rest of a system, nesoi
  • Other units of automatic data processing machines, not entered with the rest of a system, nesoi
  • Magnetic or optical readers, nesoi; machines for transcribing data on data media in coded form and machines for processing such data, nesoi
  • Recorded optical media, for reproducing representations of instructions, data, sound, & image, recorded machine readable binary form, for ADP

Semiconductors:

  • Silicon containing by weight not less than 99.99 percent of silicon
  • Quartz reactor tubes and holders designed for insertion into diffusion and oxidation furnaces for semiconductor wafer production, nesoi
  • Gold and other precious metals

Misc:

  • Lightning arrestors, voltage limiters and surge suppressors, for a voltage exceeding 1,000 V
  • Insulated electric conductors nesoi, used for telecommunications, for a voltage not exceeding 1,000 V, fitted with connectors
  • Machines for the reception, conversion, and transmission or regeneration of voice, images, or other data, including switching and routing apparatus
  • Printed circuit assemblies CTA estimates this tariff could reduce in their purchaser spending power of affected companies on the order of $900 million (10 percent tariff) to $1.8 billion (25 percent tariff)]
  • Coaxial cables
  • Other apparatus for transmission or reception of voice, images, or other data, including for communication in a wired or wireless network

Smartwatches and Bluetooth devices were taken off this list. Cisco, Dell, HPE and Juniper Networks all pressed the government to take networking and server equipment off the list, but they weren’t successful.

What You Need To Know About The 179 Tax Deduction

On January 2, 2018, H.R.1 was signed into law. It revised several previous tax laws going forward. With the passage and signing into H.R.1, the deduction limit for Section 179 increased to $1,000,000 for 2018 and beyond. In addition, the limit on equipment purchases was increased to $2.5 million.

What Is Section 179?

The IRS 179 Deduction was enacted to help dental practices like yours by allowing you to take a depreciation deduction for certain assets in one year rather than depreciating them over a longer period of time.

It lets you take an outright deduction equal to the full purchase price of a qualifying piece of equipment. This means you can lessen your taxable income, and ultimately your tax burden.

When Is The Deadline For This Year?

Section 179 always expires at midnight, December 31st. To take advantage of Section 179 this year, you must buy (or lease/finance) your equipment, and put it into use, by midnight 12/31/2018.

What About The Bonus Depreciation?

The bonus depreciation is 100%, was made retroactive to 9/27/2017 and is good through 2022. The bonus depreciation also now includes used equipment.

The Tax Cuts and Jobs Act (TCJA) extended the ability to write off Bonus Depreciation through 2026 (or 2027 for certain assets), and it made other changes to the write off percentages and the types of assets that qualify for Bonus Depreciation.

What Happens After 2022?

The 100% deduction will stay in place for five years. It will step down each year after and then end in 2026.

After 2022, the depreciation percentage will be reduced by 20% each year (80% for assets acquired in 2023, 60% for assets acquired in 2024, 40% for assets acquired in 2025 and 20% for assets acquired in 2026), until it is finally eliminated.

Can You Lease Or Finance Equipment And Still Qualify For Section 179?

Business equipment (including technology and software) financed or leased still qualifies for Section 179. This is true even if you’re making payments on equipment over several years. However, the equipment must be placed in service for business purposes to quality.

What Type of Equipment Qualifies for Depreciation?

Any equipment qualifies that’s purchased under a Capital Lease, cash sale or a dollar buyout, and where you’re considered to be the owner of the equipment and maintain full control over the residual value qualifies.

What Types of Technology Equipment Are Eligible?

  • Routers and Switches
  • Wireless Access Points
  • Off-the-Shelf Software
  • Servers
  • Phone Systems (VoIP or traditional)
  • Backup & Disaster Recovery Appliances
  • Workstations and Monitors
  • Laptops and Ultrabooks
  • Scanners
  • Battery Backups
  • Storage SAN- Storage Area Networks, RAID-Redundant Array of Independent Disks, etc.

Take advantage of Section 179 Tax Deduction if you want to buy equipment and lessen your tax burden.*

What Dental Offices Need To Know About Windows 7 and Windows Server 2008 End Of Life

An end-of-life (EOL) product is a product that does not receive continuing support.

Microsoft announced they are stopping mainstream support for Windows 7. Windows 7 is a popular operating system, so this creates concern for many. All support for Windows 7 will end on January 14, 2020. This means you won’t get bug fixes or security updates. Over time, the security and reliability of Windows 7 will make your computer vulnerable.

  • Your computers could be infected by malware, your antivirus won’t be updated, your online banking transactions protection system may expire, and your financial data could be exposed to theft.
  • Your applications may not be updated, your other software could be incompatible, utilities won’t be supported, and new devices may not connect to your system.

On January 14, 2020, support for Windows Server 2008 and 2008 R2 will also end. Once again, this means no more security updates. Your infrastructure and applications will go unprotected unless you migrate to a current version.

Have questions? Contact us.

* Please keep in mind that NOVA is a dental IT support provider. While we can offer you our advice, you should direct any questions about the finer points of Section 179 to your CPA or tax attorney.