Top Tax Write-Offs for Veterinary Practice Owners

How to save money and keep your clinic in compliance

Leading a veterinary practice entails juggling patient care with business duties. Real Cash Flow And Real Profitability: One of the greatest financial instruments to maintain and increase your cash flow is through awareness of, and utilization of real veterinary tax deductions. This guide details the most beneficial deductions for clinic owners and how to document them, plus practical veterinary tax tips that you can use to lower your taxable income without getting audited.

Employee wages and payroll taxes

For most clinics, payroll is one of the largest expenses, and fortunately wages, salaries, bonuses and even employer-paid payroll taxes are generally deductible. That includes veterinarians’ salaries, costs for technicians, receptionists and temporary help. Employer contributions to retirement plans and fringe benefits like health insurance are also generally deductible. Maintain clear payroll records, employment agreements and benefit plan documents so deductions have good support.

Rent, interest on mortgage and cost of premises

Whether you have a lease on your clinic space or own your building, rental payments and interest on the mortgage are deductible business expenses. The businessman can also claim the cost of utilities, property insurance and repairs, maintenance and cleaning services that were used to run the clinic. For mixed-use spaces (or a self-employed employee with an office), apportion the deductible amount based upon square footage and use; document the number every year.

Depreciation and section-type writeoffs for equipment

In some cases, big-ticket items, like a new surgical suite, an X-ray machine surgical equipment and computer systems can't all be written off in the year they were purchased. Depreciation allocates the cost over the useful life of the item. It’s possible under existing tax law that some assets could be eligible for accelerated or expensing allowances, which will permit substantial write-offs in the first year. Keep the purchase receipts, serial numbers and depreciation schedules in your accounting files.

Cost of medical supplies, medications and inventory

Supplies such as bandages, syringes, vaccines and drugs generally are deductible as ordinary business expenses. To track current inventions, use a recognized accounting method to determine opening and closing inventory value; the cost of goods sold and inventory adjustments will make their way through to deductible expenses. Maintain batch records and supplier invoices for controlled substances and high-value drugs.

Professional fees and continuing education

You can deduct the fees you pay to your accountant, lawyer, consultant and even licensing bodies. Continuing education for your staff and veterinarians, such as seminars, certifications and specialized hands-on trainings that enhance clinic skills is also deductible, when related to the business side of things. Keep your registration receipts, programs and proof of attendance to support the expenditure.

Marketing, advertising, and client communications

Expenses to attract and retain clients — local advertising, website costs, patient education materials, social media promotion and community sponsorships — are tax-deductible business expenses. Run campaign reports and tag ongoing marketing expenses separately so the lines of business are kept separate at tax time.

Vehicle and travel expenses

If your employees are transporting individuals or supplies, or attending conferences, and you’re letting that staff use cars for business travel (we don’t mean the daily commute from home to work), then you can deduct all associated costs. It is an 'election' switch to deduct actual vehicle expenses and-or standard mileage rate, which ever provides you are or use can produce the largest deduction.Either way a log must be kept of miles driven, purpose of trip/s, date/s. For both inside and outside the U.S., business travel to conferences or training outside of one’s home may also be deductible, subject to lodging and meal limitations.

Insurance premiums

Commercial insurance — professional liability, property, business interruption and workers’ compensation — is usually deductible. Definitely, be very clear about what policies are for business and which ones are personal.

Interest and bank fees

The interest on business loans, lines of credit and business credit cards — along with bank fees and merchant processing fees — are typically deductible. Where the loan is part personal and part business, apportion interest between personal and business use, and retain a record of how you made the allocation.

Retirement plan contributions

Contributions to qualified retirement plans for owners and employees will lower taxable income and aid in the long-term financial plan. The deduction limits and administration requirements are different for the various types of plans; coordinate timing and documentation so contributions are reflected in the proper tax year.

Home office and owner-operator considerations

If you perform administrative work from a home office, some form of proportionate deduction for an exclusively dedicated workspace might be attainable. Business use should be regular and exclusive. Compute the deduction using a streamlined method or actual expense allocation; retain floor plans, utility bills and worksheet showing the basis of dates for allocation.

Technology, software, and subscriptions

It also says that practice management software, online reference subscriptions and cloud storage are deductible as long as the tools were used to run your clinic or file claims. Amortize and deduct bigger software purchases as needed, but a lot of subscription based services are deductible as ordinary & necessary.

Documentation and audit preparedness

The best protection, then, if you want to claim a generous list of deductions? Hold on to invoices and receipts, as well as payroll records, bank and credit card statements, contracts and mileage logs for a few years at least. Write the business reason on receipts when it’s not clear. Design your bookkeeping system with tight accounting categories so that deductions such as veterinary write offs, supply costs and marketing expenditures are simple to pull during tax-time.

Year-round tax planning strategies

• Check in quarterly: Each quarter, estimate your tax liability and review deductions so you won’t be surprised.
• Time purchases: If you anticipate a more profitable year, speed up capital purchases or prepay expenses before year-end to get the deduction in that year.
• Use retirement plans to your advantage: Maximize owner contributions when applicable in order to minimize taxable income.
• Keep business and personal finances separate: Streamline tracking of business expenses, plus lower the possibility that a nondeductible personal expense could slip through.

Common pitfalls to avoid

• insufficient documentation for vehicles or the home office
• Categorizing personal expenses as business deductions
• Refusing to capitalize and depreciate assets as required
• Failure to report payroll taxes and independent contractor rules

Final thoughts

Veterinary Tax Deductions: A Cash Cow for Practice Owners Veterinary tax deductions give clinic owners a great way to reduce taxable income and get money back in the business, whether it’s growth, staff or better patient care. Good record-keeping, a regular tax planning process and knowledge of the types of deductions you can expect to claim—payroll, rent, equipment, supplies, professional fees and technology—are the difference between missed opportunity and knowing for sure that you’re filing compliantly. Utilize these veterinary tax tips to help you better manage your finances and protect the bottom line of your practice.