Medical facilities may want to act on large capital purchases before 2013 when the 2.3 percent tax from the Affordable Care Act goes into effect. Why? Medical device costs may go up, according to a study commissioned by AdvaMed.
The 2.3 percent tax will be applied to total revenue of medical device sales, anything from basic medical supplies to advanced surgical technology. However, because the tax is applied to the top line of revenue, medical device suppliers could end up with up to a 15 percent tax increase of original tax obligations, leading to a trend of increased prices to consumers to offset tax costs.*
The study, titled Employment Effects of the New Excise Tax on the Medical Device Industry, claims:
“The effect of the tax on earnings of U.S. companies is likely to be significant. In 2006, medical device manufacturers reported taxable income of $13.7 billion and paid $3.1 billion in corporate taxes. The United States already has one of the highest corporate income taxes in the world. The new 2.3 percent excise tax will roughly double their total tax bill and raise the average effective corporate tax rate to one of the highest effective tax rates faced by any industry in the world.”
While many facilities are already taking advantage of their Section 179 deductions on medical equipment, Dr. Stuart Lieblich, of Connecticut’s Avon Oral and Maxillofacial Surgery Center, believes others who are sitting on the fence about investments should act now.
“The Affordable Health Care Act going into effect 1/1/2013 includes an additional tax on medical equipment (2.3%). I know our national organizations have been trying to get that repealed, but I don’t think they are making much progress,” Lieblich said. “Therefore I have been urging colleagues to purchase units prior to that. In addition, depending on ‘fiscal cliff’ events, the loss in expensing completely medical equipment in one year may change as well.”
Contact one of DRE’s medical device consultants today at 1-800-477-2006 to learn about what deals are available before these regulation changes take effect.
*DRE is not a tax adviser. The information on this website should not be used in any actual transaction without the advice and guidance of a professional Tax Adviser who is familiar with all the relevant facts.
