Many medical practices that purchase EMR systems choose to finance their electronic medical records software and hardware investment over a 1-5 year period. EMR financing and leasing options are available to ensure that your electronic medical records system is an affordable and cost-effective replacement of your paper charts.

Using Section 179, medical practices can realize huge tax savings in addition to qualifying for the federal EMR software stimulus if they purchase and begin implementation of their EMR software in 2009.

Step 1. Purchase a Certified EMR.

The federal EHR stimulus signed into law on 2/17/09 calls for up to $63,750 per provider in Medicare/Medicaid reimbursement bonuses for providers who are ‘meaningfully using’ a certified EHR by 2011.

Step 2. If necessary, obtain financing to cover the initial software and training expenses.

Even if you obtain a loan for your electronic medical records system using an Equipment Finance Agreement (EFA), you can still take the Section 179 deduction.

How Does Tax Code Section 179 Apply to Our Practice?

* SIGNIFICANTLY! The Economic Stimulus Act of 2008 increased the small business expense for qualified property in 2008 to $250,000. The Section 179 deduction has been extended through December 31st, 2009. This means for 2009 the write-off amount is up to $250,000 with a bonus 50% depreciation.

* Expense the full cost (up to $250,000) of your equipment/medical software purchase that is purchased by 12/31/2009. Prior to the Economic Stimulus Act, the expense limit was $128,000.

* For example, your practice can expense the full amount of a $75,000 EMR software purchase including software and hardware - and reduce your practice’s taxable income.

* If your taxable income is $100,000 prior to your EMR purchase of $75,000, your taxable income is reduced to $25,000. Typically your practice can depreciate any medical software or hardware that exceeds $250,000 over the next 5 years.

Step 3. Purchase and implement your EMR in 2009.

In order to qualify for the highest incentives through the federal EHR software stimulus package, your practice must be able to substantiate that it is ‘meaningfully using’ a certified EHR system in 2011. Because of the backlog in EMR implementations even today, experts are advising that practices DON’T delay purchase and implementation until 2010. Doing so might mean that you lose out on the first and largest of the payments scheduled for 2011.Under the federal stimulus package, 2015 is the deadline to implement a certified EHR system to avoid facing additional reimbursement cuts.