Depreciation spreads the cost of a piece of equipment over the years you expect to use it, instead of counting it all as an expense the day you buy it. Your monthly books and your tax return may handle it differently, and your CPA decides the tax side.
Why equipment isn't a normal expense
Supplies get used up in a month. An exam table, an ultrasound or a computer keeps working for years. Accounting treats the purchase as an asset on your Balance Sheet, then moves part of its cost to the P&L each year as depreciation.
A made-up example
Say you buy an ultrasound for $18,000 and expect to use it for 5 years. Spread evenly, that's $3,600 a year, or $300 a month, of depreciation expense. On the Balance Sheet, the machine's book value drops by $3,600 each year until it reaches zero.
Your cash went out all at once, or over the loan term if you financed it. Depreciation is a non-cash expense. That's one reason profit and cash don't match. This post covers that gap.
Tax rules are different
Federal tax rules often let a business deduct much more of the cost in the first year than an even split would. Two common tools are a Section 179 deduction and bonus depreciation. Under the 2025 federal tax law, 100% bonus depreciation came back for qualifying property acquired after January 19, 2025, and it no longer phases down. Section 179 limits were raised too.
Writing off the whole cost in year one isn't always the best choice. It lowers this year's taxable profit but leaves nothing to deduct later, and your state may follow different rules. Which method fits your practice is your CPA's call.
Books for decisions vs books for taxes
Your monthly books can use a simple even schedule so each month's profit reflects the real cost of running the practice. Your CPA can then use different tax methods on the return. Both are normal. Your bookkeeper and CPA need to know which is which.
What to send your CPA
- The invoice, with the date and total cost, including delivery and setup.
- The date it was placed in service, meaning the day you started using it.
- How you paid: cash, loan or lease.
- Anything you sold or threw away during the year.
What I'd do this week
- List equipment bought this year that cost more than a few thousand dollars.
- Find each invoice and the date you started using it.
- Ask your bookkeeper whether each one is on the Balance Sheet as an asset.
- Ask your CPA which tax method they plan to use before December 31.
Common questions
What's the line between equipment and supplies?
Many practices use a dollar threshold set with their CPA. Items under it are expensed, and items over it become assets. Ask yours what line they use.
Should I buy equipment in December to save tax?
Only if you need it. A deduction saves a share of the cost, not all of it. Check your cash floor and ask your CPA first.
What happens when I sell old equipment?
The sale gets compared to its remaining book value, and the difference can be a gain or a loss. Send your bookkeeper and CPA the sale details.
Want your equipment recorded right?
We reconcile every account every month and send your P&L and Balance Sheet by the 15th, so decisions like this start from real numbers. If that's what you need, apply to work with us.