Archive for November, 2012|Monthly archive page

What You Need to Know About the Medical Device Tax

As part of the Affordable Healthcare Act (Obamacare) that was signed in 2010, the Medical Device Excise Tax will take effect on January 1, 2013.¬† The 2.3% excise tax will be collected and reported by the manufacturers of the devices. The word “device” is misleading as to what items will actually qualify for the tax.

The provisions of the excise tax on medical devices rely almost entirely on the definition of medical devices provided by Section 201(h) of the Federal Food, Drug, & Cosmetic Act to determine which devices are taxable. The tax will apply to devices that are intended for human use and will include dental instruments, dental equipment, and research-use-only devices.

After doing some research on the matter, it seems that just about everything that you use in your dental office, will fall under this tax…burs, composites, impression material, bonding agents, etc…you get the point.

We have been getting letters from just about every dental manufacturer over the last few weeks stating that they will be instituting a 2.3% price increase on January 1, 2013 to cover the excise tax. Many have also informed us of their annual price increase as well, in some cases we are looking at increases of 4-7%.

While there isn’t much you can do to avoid paying the tax via price increases, you can be pro-active over the next 6 weeks. Here are a few ideas…

1. If you are planning to upgrade your existing equipment, add digital sensors, etc., consider getting it put into service before December 31, 2012. Not only will you avoid the 2.3% tax, you will be able to take advantage of Section 179’s increased allowances for 2012.

To take advantage of this deduction, your Section 179 Qualified Financing and your equipment must be in place on or before December 31, 2012.

2012 Deduction Limit = $139,000
Section 179 Deduction limit after adjustment for inflation has increased to $139,000 (maximum allowance would have been only $25,000 prior to the new legislation).

2012 Limit on Capital Purchases = $560,000
Section 179 Threshold for total of equipment & software that can be purchased has increased to $560,000 (threshold would have been only $200,000 prior to the new legislation).

Courtesy of

2. Stock up on your dental supplies before the end of the year. You will not only save paying the tax, but you will get those items at 2012 prices. That is a 4-7% savings…you wont make that on your money sitting in the bank. We are suggesting 3-6 months worth, depending on your finances and storage space.

We suggest you consult  your tax professional regarding Section 179.

This week, leading executives from a broad coalition of medical technology companies, physician groups, venture capital firms and leading associations submitted a letter to Senate leadership urging policymakers to repeal the onerous medical device tax that threatens U.S. jobs, medical innovation and patient care.

Here are some good resources on the Medical Device Tax

Dental Industry: Prepare for New Medical Device Excise Tax in 2013

IRS: Medical Device Excise Tax: Frequently Asked Questions

Obamacare details coming soon for device tax, hospital payments, requirements for exchanges
Medical Device Manufacturers Association