spring 2009

F I N A N C I A L
Budget tax break means big IT savings for MDs


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A CMA taxation proposal that was put forward as the federal government prepared its 2009 budget has paid off in a big way.  A little-noticed provision in the Jan. 27 federal budget means that physicians can now deduct the entire cost of computer hardware during the year of purchase instead of making reduced deductions over several years.

By CMA Staff

A CMA taxation proposal that was put forward as the federal government prepared its 2009 budget has paid off in a big way.

A little-noticed provision in the Jan. 27 federal budget means that physicians can now deduct the entire cost of computer hardware during the year of purchase instead of making reduced deductions over several years. The new rule is in effect from Jan. 27, 2009, to Feb. 1, 2011. The CMA had proposed the move in its August 2008 pre-budget submission to Finance Minister Jim Flaherty.

“This is a very big decision in our favour and we want every physician to know about it,” says CMA President Robert Ouellet. “It is especially good news for physicians who are considering updating or introducing IT [information technology] systems into their offices.”

Nick Neuheimer, the CMA’s associate director of research, says the decision could benefit thousands of physicians. “Let’s say Dr. Jones bought a new $3,000 computer for her practice in December 2008. She could have claimed a capital cost allowance [CCA] tax deduction of $825 in 2008, with declining deductions in subsequent years. However, if she bought that same computer on or after Jan. 27, 2009, she could claim the entire $3,000 deduction in one year, which means that the deduction has increased by $2,175.”

Neuheimer said the CMA’s proposal for the quicker tax write-off coincided with federal attempts to stimulate the economy by encouraging spending in areas such as IT. He described the CCA incentive as an “early-bird special that will stimulate the economy and contribute to productivity within the health care sector.” Acceleration of the CCA deduction is expected to cost the federal government $695 million.

“If physicians were thinking of upgrading or replacing older IT systems, this measure might encourage them to make the change earlier than planned,” says CMA Board Chair Michael Golbey, who also sits on the board of the Canada Health Infoway (CHI).

“There’s no doubt it is beneficial to be able to write off the entire cost in one year.” He said the CMA suggested the accelerated write-off to help hasten the adoption of electronic medical record (EMR) systems. “This budget is good news in that regard because we lag far behind other countries in the use of EMRs,” he said.

Golbey said the CMA’s pre-budget suggestion makes more than economic sense. “I believe it is part of the CMA’s role to encourage physicians to adopt new technology when this makes sense from a clinical and practice-management point of view. There is ample evidence that adopting EMRs ultimately improves patient care, so it follows that as an organization we should encourage their use and do what we can to make their adoption easier.”

The accelerated CCA deductions are just part of the EMR equation, since implementation also requires conversion from paper to electronic records and the purchase of related software. Fortunately, the government also heeded the CMA’s pre-budget call for additional funding to support EMR implementation by providing $500 million to the CHI. Ouellet says the CMA will now work with the Infoway and provincial/territorial medical associations to ensure that the new tax incentives and CHI funds provide maximum benefit to physicians. “We have been advocating on these issues for several years,” he concluded, “and it’s nice to see that work paying off.”

Physicians seeking additional information regarding the accelerated CCA provision should consult their accountant.

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