While the past year has been a tumultuous time for the health care industry, it has also been a year of changes to the tax code. Below are high-level summaries of some common tax credits and deductions for optometrists. A specific look at those resulting from COVID-19, The Coronavirus Aid, Relief, and Economic Security (CARES) Act and subsequent rulings can be found in this article’s companion piece, scheduled to appear in the June issue of Optometric Management.

DISABLED ACCESS CREDIT

Your practice is eligible for this credit if the gross receipts for the preceding tax year did not exceed $1 million or the practice has no more than 30 full-time employees during the preceding tax year. This covers up to 50% of disabled access expenditures ranging from $250 to $10,000. The maximum credit available is $5,000 on $10,000 of expenditures. This credit can be claimed on Form 8826 (irs.gov/forms-pubs/about-form-8826 ).

BONUS DEPRECIATION

As a way to accelerate depreciation, bonus depreciation allows a business to write-off eligible property in the year the business starts using it. The Tax Cuts and Jobs Act, enacted at the end of 2018, allows a business to write off 100% of the cost of eligible property as first-year bonus depreciation for any eligible property placed in service after Sept. 27, 2017, and before Jan. 1, 2023. After that, first-year bonus depreciation phase-down will be carried out as follows:

• A total of 80% for property placed in service after Dec. 31, 2022 and before Jan. 1, 2024.
• A total of 60% for property placed in service after Dec. 31, 2023 and before Jan. 1, 2025.
• A total of 40% for property placed in service after Dec. 31, 2024 and before Jan. 1, 2026.
• A total of 0% for property placed in service after Dec. 31, 2025 and before Jan. 1, 2027.

SECTION 179 DEDUCTION

Like bonus depreciation, O.D.s can write-off certain eligible property up to $1.05 million for 2021. However, this deduction starts to phase out when the eligible property placed in service in the tax year exceeds $2.62 million for 2021.

EDUCATION

Education benefits provided under an employer’s nondiscriminatory education assistance plan are excludable from the employee’s income and deductible by the employer up to $5,250. Deduct them on the “Employee benefit programs” or other appropriate line of your tax return. See Educational Assistance in section 2 of Publication 15-B (irs.gov/forms-pubs/about-publication-15-b ).

MEALS/ENTERTAINMENT EXPENSE DEDUCTIONS

The Consolidated Appropriations Act of 2021 temporarily increased the deductions for business meals to 100% from 50% if the expense is for food or beverages provided by a restaurant, and the expense is paid for or incurred in 2020 and 2021. If the meals are not provided by a restaurant, the deduction is still limited to 50%. Entertainment expenses, such as amusement or recreation, including club memberships (i.e. golf), are not deductible, but the meals related to business discussion during said entertainment activities are 50% deductible. Of note: A 100% deduction is allowed for food or beverage expenses incurred by the O.D. for its employees for holiday parties, annual picnics, etc.

EMPLOYEE FRINGE BENEFITS

Employee fringe benefits, including transportation and on-site gym paid by employers are no longer deductible. These should be posted to separate accounts. Conversely, employees are not required to report these fringe benefits as income.

OFFICE SUPPLIES AND EXPENSES

Supplies purchased for the practice and used within the year, such as pens, paper, printer supplies, etc., can be deducted as conventional business supplies and office expenses provided a record of all receipts are maintained. Also, consider taking an inventory of your fixed assets, especially computers and specialized tools. The IRS has a de minimis safe harbor rule that allows purchases of $2,500 or less to be expensed. A business that has an audited financial statement is allowed to expense up to $5,000 under the de minimis safe harbor rule.

PROFESSIONAL SERVICE FEES

Fees charged by accountants and attorneys that are ordinary and necessary expenses directly related to operating your practice are deductible as business expenses. Other consulting services, such as web design or marketing, also are generally deductible.

RENT, LEASE AND UTILITY EXPENSES

In general, O.D.s can deduct rent as an expense in the year it was paid or incurred, only if the rent is for property used for the optometry practice. You also can generally deduct as rent an amount you pay to cancel a business lease. If you lease a business property, you can deduct as additional rent any taxes you pay to or for the lessor. When you can deduct these taxes as additional rent depends on your accounting method. Utilities, such as electricity, water and phone service are also deductible, and O.D.s should keep track of these expenses to maximize their deductions. Refer to IRS Publication 535 (irs.gov/pub/irs-pdf/p535.pdf ) for additional information.

TRAVEL EXPENSE DEDUCTIONS

Traveling to a convention? Your lodging and 50% of your travel-related meals are deductible if your business trip is overnight or long enough that you need to stop for sleep or rest to properly perform. Your meals deduction includes the amount you spend for food, beverages, taxes and related tips.

THE WORK OPPORTUNITY TAX CREDIT (WOTC)

The WOTC is a federal tax credit available to employers if they hire individuals who have had significant barriers to employment. The credit has been extended to cover certain individuals who began working for a company in 2020, specifically qualified long-term employment recipients. To get the credit, the wages must be wages on which your practice has paid Federal Unemployment (FUTA) tax and have actually been paid by your practice directly (see bit.ly/OM2105Taxes ).

Check the Department of Labor Work Opportunity Tax Credit Eligibility Chart at bit.ly/OM2105Taxes2 for details. The credit can be claimed on Form 5884 (irs.gov/forms-pubs/about-form-5884 ). OM

MR. MADHUSUDANAN is a tax partner at Citrin Cooperman, one of the top-25 largest CPA firms in the U.S. With more than 16 years of experience, Mr. Madhusudanan provides tax planning and quality control services for his clients.