Section 179 & Equipment Leasing
Capital Structuring for ODs
Section 179 and bonus depreciation provisions allow Arizona optometrists to fully expense qualifying equipment in the year of acquisition — transforming a capital deployment into an immediate, substantial tax event. Lumina structures the instrument that maximizes the benefit.
Intelligence Report — Node 17
Section 179: The Tax Code's Institutional Instrument for the Investing OD
Lumina Medical Capital advises Arizona optometry practices on the intersection of capital structure and tax architecture. Section 179 of the Internal Revenue Code is one of the most powerful — and most frequently underutilized — instruments available to the equipment-investing physician.
Under current federal tax provisions, qualifying business property placed in service during the tax year may be fully expensed in that year, rather than depreciated over the standard 5–7 year MACRS schedule applicable to optometry equipment. For a Scottsdale OD investing $75,000 in an OCT platform, this distinction produces a first-year federal and state income tax deduction of up to $75,000 — rather than the $10,714 that standard depreciation would yield in year one.
At a combined federal and Arizona state marginal rate of 40%, this produces an after-tax cost reduction of approximately $30,000 on the same equipment investment — effectively subsidizing nearly 40% of the instrument's acquisition price through the tax code. The capital structure determines whether this benefit is captured or lost.
Advisory Note: Section 179 eligibility, deduction limits, and interaction with bonus depreciation rules change with federal legislation. The mechanics discussed in this report reflect current provisions. Lumina strongly recommends engagement of a Scottsdale-based healthcare CPA before finalizing equipment capital structures based on tax treatment. See our Scottsdale OD Advisory Directory for vetted healthcare CPA resources.
Tax Architecture
Section 179 Mechanics: What Qualifies, What Limits, What Structures
Qualifying Property for OD Practices
Tangible personal property used in the active conduct of a trade or business and placed in service during the tax year. For optometry practices, this includes:
- ◈ OCT systems (anterior and posterior segment)
- ◈ Fundus cameras and imaging systems
- ◈ Visual field analyzers and perimetry equipment
- ◈ Diagnostic laser and therapeutic platforms
- ◈ EHR hardware and clinical IT infrastructure
- ◈ Examination chairs, slit lamps, and refraction lanes
- ◈ Practice-specific software and frame inventory management systems
Critical Limitations
- → Section 179 deduction is limited to net taxable income from the business. It cannot create a net operating loss (unlike bonus depreciation).
- → Property financed via operating lease (where you don't own the equipment) typically does not qualify unless the lease is structured as a conditional sale or capital lease for tax purposes.
- → Equipment must be placed in service (operational, not merely purchased) before December 31 of the election year.
- → Real property, building structures, and land do not qualify under Section 179 (though some qualified improvement property may qualify under bonus depreciation).
Illustrative tax benefit calculation for qualifying equipment acquisitions in an Arizona S-Corp or LLC optometry practice.
Illustrative only. Assumes 37% federal + 4.5% Arizona marginal rate. Actual tax benefit depends on practice entity structure, income level, state apportionment, and application of current bonus depreciation phase-down schedule. Engage your healthcare CPA before executing.
Lease Architecture
When to Lease, When to Purchase: The OD Decision Matrix
The lease-versus-purchase decision for optometry equipment is not purely a tax question. It is a capital structure decision that must integrate tax position, exit timeline, working capital requirements, and technology obsolescence risk.
Finance Lease (Capital Lease)
Ownership transfers at end of term. Section 179 and bonus depreciation apply in year one. Preserves cash flow via monthly payments while capturing the full tax benefit of ownership. Optimal for high-income ODs in high-revenue years with strong practice EBITDA.
Operating Lease (True Lease)
Monthly payments are fully deductible as operating expenses. No Section 179 election possible. Equipment remains off balance sheet. Optimal for practices within 24–36 months of an exit event — preserving debt capacity for the transaction itself and enabling technology upgrades.
$1 Buyout Lease
Structured as a finance lease for tax purposes. Full Section 179 eligibility in year one. Equipment ownership transfers for $1 at term end. Effectively a disguised purchase — provides full depreciation benefit while distributing cash outflow across the lease term.
10% Purchase Option Lease (FMV Variant)
Hybrid structure with a predefined fair market value purchase option. Treated as an operating lease unless the option price is considered a bargain purchase. Tax treatment depends on structuring. Preferred when technological obsolescence risk is high and exit timeline is mid-range.
SBA 7(a) Integrated Equipment Tranche
Equipment cost bundled into a practice acquisition or expansion SBA 7(a) commitment. Full Section 179 eligibility preserved. Lowest monthly debt service via extended amortization. Optimal when deploying multiple capital instruments simultaneously — acquisition + equipment + working capital.
Conventional Equipment Note
Direct purchase via 5–7 year term note. Full Section 179 deduction in year one. Clean, simple balance sheet presentation. No SBA documentation requirements. Preferred for single-instrument acquisitions in practices with strong existing lender relationships and verified cash flow.
The Tax Code Subsidizes
The OD Who Plans Precisely.
Every Arizona OD deploying equipment capital in the current year has a meaningful choice in how that capital is structured. The right structure captures a 35–45% after-tax cost reduction. The wrong structure leaves that benefit in the treasury. Lumina ensures you do not leave it there.
Initialize Practice Equity Assessment →Complimentary advisory. Institutional precision.