By Gina Luke, assistant director, AVMA Governmental Relations Division
We just passed April 15—the annual tax filing deadline in America. While most were scrambling to submit their taxes, the AVMA joined other organizations in asking Congress to support provisions that are highly important for veterinarians and veterinary practices all across the country.
The AVMA expressed its support for the Section 179 tax provision of the U.S. tax code, which allows small businesses to immediately deduct the full value of their investments in new and used equipment—machines, computers, software, office furniture, business vehicles weighing over 6,000 pounds, etc.—that were purchased or leased during the tax year that the investment was made, instead of depreciating the investments over time. This simplifies accounting and frees up cash to be reinvested in veterinary practices.
The provision is scheduled to expire Dec. 31, 2015, but by permanently extending this deduction, Congress would be giving veterinary practice owners and other small business owners the certainty they need to continue investing in equipment for their businesses. In 2014, the Section 179 deduction permitted businesses to deduct from their gross income up to $500,000 in equipment purchases as long as they spent less than $2 million on equipment. For 2015, the deduction is limited to only $25,000, with a total equipment purchased for the year threshold of $200,000.
In February, House lawmakers successfully passed legislation (H.R. 636) that would renew Section 179 and make the deduction of up to $500,000 permanent. The AVMA congratulated House lawmakers for their work in passing this bill (PDF) and urged the Senate to take similar action (PDF) so that veterinary practices are not faced with an immense tax hike. Permanent extension of Section 179 is important for veterinary practices, both as American small businesses and as providers of essential veterinary services for a full spectrum of animals—from pets to livestock to captive wildlife. Because the provision allows practices to plan ahead, veterinary small business owners can invest in new and leased expensive equipment and property they need to continue providing veterinary medical services to their communities.
Student loan debt is a burden for many young veterinary professionals. To that end, the AVMA is also seeking to make changes to the U.S. tax code that would exclude debt that is forgiven from being taxed.
The tax code already provides an exclusion for individuals that work for a specified time period in certain professions or for loan forgiveness programs, such as the Public Service Loan Forgiveness program or the National Health Services Corps’ Loan Repayment Program, and for borrowers working in government and certain nonprofit jobs. These programs permit former students with high student loan debt to more easily manage their debt and avoid default in exchange for working, likely for lower salaries, in public service. Congress established these programs to provide incentives to students to work in certain areas and to increase college access and affordability. The AVMA supports the tax exclusion of the discharge of remaining student loan debt as part of these programs and urges similar treatment for four others in which it does not currently apply, including: the Veterinary Medicine Loan Repayment Program, Income-Based Repayment, Pay As You Earn, and Income Contingent Repayment.
Finally, the AVMA is urging lawmakers to continue and broaden the Student Loan Interest Deduction (SLID). Currently, taxpayers with modified adjusted gross income less than $80,000 ($160,000 for joint filers) may deduct up to $2,500 in federal student loan interest payments each year. This interest limit has been in place since 1997 and should be increased, as should the adjusted gross income a taxpayer is permitted to qualify for the deduction. To qualify, a student loan must have been for qualified educational expenses, such as tuition and fees, course materials, and room and board.
Over the course of their education, veterinary students take out several federal student loans to finance their education. Managing student loan debt after graduation can be a significant hardship. Actions taken by Congress in recent years have increased borrowing costs by eliminating the six-month grace period for interest to accrue for college graduates and by implementing interest charges for graduate and professional student borrowers while they are in school. With these increased loan costs, SLID has become even more important.
Lawmakers have grappled with tax reform for years and they are expected to continue their work throughout the 114th Congress. Because so many of AVMA’s members operate small businesses and so many of our newest members struggle with educational debt, the AVMA is urging lawmakers to develop a comprehensive tax plan that addresses the needs of the veterinary profession in the 21st century economy.