How did your veterinary practice fair this past tax season? Did you owe more than expected? Were you surprised? At RBT CPAs, we work with clients to develop tax planning strategies to help you avoid surprises and potentially keep more of your hard-earned money.

We start by learning about you, your business, and your short- and long-term business goals. Your strategy for taxes can differ and change depending on a variety of factors, like whether you have had a few profitable years in a row; whether you rent or own the building where your practice is based out of; whether you plan on expanding services requiring investments in equipment and more employees; and more.

Next, we walk you through opportunities to reduce tax liabilities. For example:

• Do you need new (or used) office furniture or equipment? You may qualify for Section 179 deductions for the cost of computers and software, furniture, equipment, and certain vehicles. If you put any eligible purchases into service before the end of this year, there’s an additional 60% bonus deduction. The bonus deduction drops to 40% in 2025 and 20% in 2026 before expiring come 2027. So, even if you were thinking of waiting another year to make certain purchases, the higher bonus deduction may be worth accelerating your timeline.
• Do you own the building that your practice operates from? Are you considering facility updates or an expansion? If you do you’ll want to know about the beneficial tax treatment of energy-efficient upgrades. Security, HVAC, and fire protection systems, as well as structural improvements, may qualify for deductions.
• Do you and/or your staff attend industry conferences or events? Travel, hotel, and the cost of the event may serve as deductions – just be sure to keep good records and receipts.
• Do you host off-site meetings and events for staff? If you use your home – primary or vacation – as the meeting location, you can charge your business “reasonable rent” without having to claim it as income. This only applies if the maximum number of rental days is 14 or less; although, they don’t have to occur concurrently.
• Are there benefit plans you should consider offering to enhance your ability to attract and retain employees and get a tax deduction for contributions?
• Are you taking advantage of an accountable plan for employee business expenses so you and your employee save on withholding and FICA taxes?
• What are the pros and cons of changing your business structure (for example, from a single-member LLC to an S Corp)? Is now the right time?

Finally, we equip you with a roadmap to help you make the most of the time left in 2024 to make smart tax moves. Interested in learning more? Schedule a tax review and planning session today by emailing slhowell@rbtcpas.com or going to our webpage to request a meeting. We would love to have the opportunity to show you how we can be Remarkably Better Together.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.

Updating an existing facility or buying or building a new one is an exciting time in any business’s journey. Taking the time to understand the many facets of this venture can save you time, money, customers, taxes, and more.

Here are some considerations as you get started…

What’s your short- and long-term business strategy and goals, and how will the upgraded/new facility support them?

Are you looking for a facelift and to maintain the status quo or do you have plans to improve service and productivity, accommodate more clients, or expand your offerings? How does this align with and support your exit plan?

How can a renovation or new facility enhance your brand and reputation?

The customer experience you create and deliver can be enhanced with the right design and execution. For example, if you want to allow clients to visually or physically accompany pets throughout visits, an open-concept design or glass walls may be in your future.

What’s your budget?

Developing a budget enables you to set realistic parameters for your project and helps you prioritize where to invest so you get the biggest return on investment. It also helps when it comes to determining the best way to finance and pay for the upgrade.

What’s on your wish list?

Maybe you’ve always wanted a triage area or more on-site diagnostic capabilities. Perhaps you want your passion for sustainability and the environment reflected in your facility (i.e., covered parking spaces with solar panels powering your facility). Is it time to upgrade your technology infrastructure to promote paperless transactions and communications, while allowing pet owners to work while waiting?

Is talent recruitment and retention a priority?

Consider how a renovation can enhance your employee experience with upgrades like lockers to store personal items; a break room that really provides a break; an outdoor mental health space; or a private nursing area.

Be prepared to consider a lot of details.

How can your facility design foster patient flow from arrival through treatment and payment? Do you need a triage area with easy access to a lab and x-rays? Do your pharmacy and retail items need to be located by where customers checkout and pay? How about the outside of the facility – from parking to walkways and awnings? What about isolation areas, lighting, flooring, noise control, ventilation, storage, security, cleaning, and sanitation requirements? Patient flow, functionality, and safety should be top of mind.

How will it impact your clients and business today?

Can you still conduct business while a renovation is taking place? Will the number of clients you treat, the services you provide, or your revenue be affected?

Should you engage professionals who specialize in renovating or building veterinary facilities?

Companies and people who find and oversee the renovation or building of veterinary facilities know the ins and outs, from regulations, zoning, and codes to location, planning, design, and execution. Talking to these professionals can help you better understand everything involved in a renovation, purchase, or build. Engaging them frees you up to continue focusing on your practice while having a partner to help you navigate the process.

Do you know the tax strategies, credits, deductions, and options are available?

Your renovations and improvements may qualify for Section 179D and Section 179 deductions for things like furniture and equipment; computers and software; machinery and medical equipment; security and HVAC systems; roofs; fire protection systems; and more. There are efficient energy deductions and solar incentives available to consider as well. For example, are you contemplating installing electric car chargers at your facility? You could benefit from certain tax incentives in the year of installation. Also, employing cost segregation can make a difference when it comes to writing off costs. Some elements of your renovations and improvements can be eligible for accelerated depreciation methods so a cost segregation could lead to accelerated tax benefits and increased cash flow.

If you’re considering renovations, moving, or building a new facility, please remember, RBT CPAs professionals are available to help you with budget creation and tracking; tax strategy; and more. We are also available to support all of your accounting, tax, audit, and advisory needs. We’ve been proudly serving municipalities, businesses, non-profits, and individuals in the Hudson Valley for over 55 years. Please don’t hesitate to give us a call and find out how we can be Remarkably Better Together.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.

There are some big changes coming to gift and estate tax laws that can significantly increase estate taxes and decrease your financial legacy. As you work so hard to take care of animals, their owners, and your employees, make sure you’re also taking steps to protect the wealth you’ve built by making gift and estate tax planning a priority this year.

Without legislative action, the valuable Tax Cuts and Jobs Act’s (TCJA’s) gift and estate tax exemption is set to revert to pre-2018 levels starting in 2026. This will significantly increase the amount of an estate subject to Federal taxes. Add to that New York’s estate tax rules and taking the time to create and/or update your estate plan will make a big difference in how much of your estate goes to the people and causes you care about, and how much goes toward taxes.

On January 1, 2018, the TCJA took effect. Certain provisions increased the amount of assets individuals and married couples may gift annually and over a lifetime (as well as leave as part of an estate), with no federal taxes owed. Each year, exemption amounts are adjusted for inflation. For 2024:

• The annual gift exclusion limit is $18,000 (or $36,000 for a married couple) per person. You do not pay taxes on gifts up to the limit. What’s more, amounts up to the annual limit do not count toward the gift and estate tax lifetime exemption. So, let’s say you are married and have two children. You and your spouse may each gift $18,000 to each child, for a total combined gift of $36,000/child in 2024. You won’t have to pay taxes on the gift and the gift won’t apply toward your lifetime gift and estate tax exemption. (There is an exception: if you are married and your spouse is a U.S. citizen, you can gift an unlimited amount to your spouse tax-free. If your spouse is not a U.S. citizen, there is an annually adjusted limit on tax-free gifts. For 2024, that amount is $185,000.) To qualify for the annual gift exclusion, the gift must be a present interest gift.
• The gift and estate tax lifetime exemption is $13.61 million (or $27.22 million/married couple). Amounts above the lifetime exemption are taxable. Even though the exemption is scheduled to decrease starting January 1, 2026, any exemptions for 2018 through 2025 will be honored at the higher exemption amounts in effect at the time. The Federal tax law has a portability provision that provides for the unused exemption of the first spouse to die to be available to the surviving spouse if an estate tax return is filed when the first spouse passes away and the surviving spouse is a U.S. citizen.

Both the annual limit and lifetime exemption will be adjusted for inflation again at the start of 2025. Then, on January 1, 2026, the gift and estate lifetime exemption goes back to its pre-2018 level of $5 million, adjusted for inflation (so it’s expected to be in the $7 million to $8 million range). This will significantly reduce the amount of assets that can be gifted over a lifetime and passed on as part of an estate tax-free. In New York, it’s a bit more complicated.

New York does not have a gift tax; however, it does have different rules for estate taxes. Key differences include:

• An estate tax exclusion is tied to federal tax laws from 2014 and gradually indexed for inflation. For 2024, the New York estate tax exclusion amount is $6,940,000.
• However, there is a “cliff” built into the calculation. If a decedent’s taxable estate is between 100% and 105% of the exclusion amount as of the date of death, exclusion benefits phase out. There is no exclusion benefit if a taxable estate is more than 105% of the exclusion amount as of the date of death. This means New York State estate taxes are due starting with the first dollar of assets.
• Gifts made within three years of death are not excluded and are “clawed back” to be included in the calculation of New York estate taxes.
• New York does not have a portability provision and, thus, does not allow an unused exclusion amount to transfer to a surviving spouse.

There are actions New Yorkers can take to stay within the state’s exclusion amount while avoiding the “cliff” and maximizing opportunities under Federal estate tax laws. To learn more about your options, contact RBT CPA Trust, Estate and Gift Practice professionals by emailing Ita Rahilly, CPA, at irahilly@rbtcpas.com. Your RBT CPA client manager is also available to help start the discussion, in addition to handling your accounting, tax, audit, and business advisory needs. Give us a call today.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.

The veterinary industry has certainly seen its share of ups and downs over the last few years in terms of business valuations, acquisitions, consolidations, sales, and general performance. Now that businesses are getting more accustomed to operating in an environment marked by high inflation (that’s coming down) and high interest rates (that will likely come down), and the threat of a recession is waning, we predict 2024 will foster greater stability in the veterinary marketplace.

Starting with acquisitions and consolidations, following last year’s lull and the prior two years’ bubble, we anticipate there will be a gradual uptick in 2024. With so many of the larger veterinary practices and hospitals already targeted for acquisition and consolidation, we would expect to see interested parties begin exploring smaller practices, with two or more doctors and strong profitability. While valuations may be up slightly from last year, returning to 12 to 18 times EBITDA common in 2021 and 2022 is not likely.

There’s also indication that deals will involve less cash up front, be more complex, and cover longer time spans. Considering continuing labor challenges, it wouldn’t be surprising for acquirers and consolidators to look for current doctors to sign on to longer employment contracts than in the past.

As for actual business performance, the environment remains challenging. Pet owners are tightening their belts to address the impact of inflation and interest rates on their disposable income. A number of sources are citing decreases in veterinary visits and longer time lapses between visits. This will likely continue in 2024.

To offset declines, 2024 will likely see an increased interest in practices expanding their value proposition, by adding or expanding services and high revenue sources (to include things like dental) and exploring technology upgrades. No doubt, promoting operating efficiencies by eliminating non-value-added work with technology and keeping a close watch on inventory and material costs to protect profit margins will remain priorities for all. The upside of all of this effort is that these actions – and their results – make a practice more attractive to buyers and investors.

At the same time, growing interest in new delivery channels like telemedicine and new business models like mobile operations will continue in 2024, although we wouldn’t expect it to be at a pace that causes any major industry disruption…at least not this year.

My observations are general and, in truth, they can turn on a dime (although I don’t think that will happen), especially considering the many factors that can impact the economy and business today.

While understanding the big picture landscape is important to inform goals and business decisions, focusing on your practice is where the real opportunity can be found. Whether you’re looking to develop a business strategy; bring a CFO-like focus to your operations; or need accounting, tax, audit or other business advisory services, please don’t hesitate to give us a call. We are RBT CPAs. For over 50 years, businesses across the Hudson Valley, New York and beyond have partnered with us because they know we believe we succeed when we help them succeed, and we can be Remarkably Better Together.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.

While digital technology has brought about significant service and operational improvements in veterinary practices, it has also resulted in a growing number of cyberattacks and threats. Breaches can result in everything from all your data being eliminated to confidential financial information about pet owners being released into the dark web. It can disrupt business, discredit your practice, and hurt your reputation not to mention finances. What can you and your team do to reduce the risk of a cyberattack?

1. Regularly update software.

Obsolete software often contains vulnerabilities that hackers can exploit. Ensure that all software, including your practice management system, antivirus software, and operating system, are always updated to the latest versions. Regular updates not only provide new features but also fix security bugs.

2. Train employees.

One of the biggest threats to cybersecurity is human error. All employees should be aware of potential cyber threats and how to avoid them. Conduct regular training sessions to educate employees on safe online habits, phishing scams, and the importance of strong passwords. (At the end of this article, you’ll find links to free cybersecurity resources, including training. Read on…)

3. Adopt strong password policies.

Weak passwords are one of the most common causes of data breaches. Encourage employees to use complex passwords and change them regularly. Implementing multifactor authentication can also add an extra layer of security.

4. Secure your Wi-Fi network.

Unsecured Wi-Fi networks are an open invitation for hackers. Ensure your practice’s Wi-Fi network is encrypted, hidden, and password protected. Also, consider setting up a separate network for clients to prevent unauthorized access to the practice’s main network.

5. Backup your data.

Regular data backups can save your practice in case of a ransomware attack. Ensure that all important data, including patient records and financial information, is backed up regularly in secure external storage or cloud-based systems.

6. Invest in cyber insurance.

While preventive measures are crucial, having a safety net in the form of cyber insurance can mitigate financial losses in the event of a cyber-attack. Cyber insurance can cover costs related to data recovery, customer notification, and potential legal liabilities.

7. Have an incident response plan.

In the unfortunate event of a breach, a well-documented response plan can limit damage, and reduce recovery time and costs. This plan should outline how to isolate affected systems, who to notify, steps to recover lost data, and how to analyze the breach to prevent future incidents.

More information and free resources – including training – to support and build your cybersecurity plans are available through CISA (the U.S. Cybersecurity and Infrastructure Security Agency). In addition, CISA created StopRansomware.gov, with free resources for organizations of any size to protect themselves from becoming a victim of ransomware and knowing what to do before, during, and after an attack.

Cybersecurity should be a top priority for every veterinary practice. By implementing robust security measures and fostering a culture of cyber awareness, you can shield your practice and clients from potential threats.

To free you up to focus on important aspects of your business, like cybersecurity, please know RBT CPA professionals are available to handle your accounting, tax, audit, and business advisory needs. Give us a call to learn more.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.

Whether you are five years or 35 years away from retirement, understanding the long-term options for your business should guide the strategies and actions you take today.

No doubt, the most lucrative opportunities rest with selling to corporate consolidators. It’s estimated that about 25% of veterinary practices are now owned by a corporation, with momentum expected to continue in the years ahead. These corporations are learning how to maximize profitability of practices, with systems, processes, policies, purchasing, and more.

Consolidators have also learned where their biggest earning potential lay.

So, they target practices in large urban areas with more than two veterinarians on staff. Emergency services practices are among the most popular. Strong financials, brand, client base, reputation, and more all come into play, as do updated facilities, systems, lab equipment, and staff. (Let’s not forget state regulations. New York is one of several states prohibiting corporations from practicing veterinary medicine. To make a sale, a licensed veterinary owner needs to continue working and managing the medical side of the business.)

In recent years, it wasn’t uncommon to hear about corporate consolidators offering 10x to 15x (and sometimes even 20x) a practice’s value. It appears that these offers may have reached their peak and are coming in lower, but still higher than what you can get from a private buyer. However, this option is not available to everyone. If you find that your practice does not meet the criteria corporate consolidators are looking for, you still have options.

While corporate consolidators have definitely changed the landscape, there are still veterinarians who want to run their own business and be their own boss. With a severe talent shortage and pipeline, this pool of interested purchasers is smaller than in the past and they can’t offer the same multiples as large corporations.

Although the traditional process of selling a practice to an up-and-coming vet can be cost-prohibitive, especially when you consider student loan debt and the current economic environment, there are creative ways to structure customized sales to benefit both the buyer and the seller. (RBT CPA professionals can provide more details based on your specific practice and situation.)

One other option to consider: a merger.

While another veterinary practice in the area may have been your competitor for years, a potential merger can lead to more options for your exit strategy. With economies of scale, you can improve your financials, productivity, and purchasing power. A larger practice may be more attractive to recruits. You have more options for selling out to the partnership or an up-and-comer. This could also be the step that puts you on a corporate consolidator’s radar.

Regardless of where you are in your journey, it’s never too early to start exploring and planning for your exit strategy. If you need advice or assistance with your existing strategy, any aspect of operating a business, or accounting, tax, and audit needs, please remember RBT CPAs is here to help. Give us a call to learn what we can do for you and your business.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.

Have you been thinking about purchasing new or used medical equipment to enhance your veterinary services? How about upgrading technology and software or updating your facility and equipment? With end of year approaching, you have limited time left to consider whether to purchase, lease, or finance certain assets to take advantage of Section 179 tax benefits. It’s also a good time to consider how Section 179 may play into your business and tax strategy for 2024.

Section 179 uses first-year expensing. That means you can deduct the expense for an eligible asset immediately, rather than depreciating it over time. It serves as an incentive for a business owner to invest in the business and enhance its capabilities and services with the purchase and installation of capital equipment.

One big caveat: You must put the asset you purchase into service the year that you plan on taking the deduction. With just weeks left in 2023, it will be important to account for this in your planning.

Most small and mid-sized business owners qualify for Section 179 deductions. Qualifying purchases can include office furniture and equipment; computers and software; certain vehicles (some with annual deduction limits); machinery and medical equipment; and other property used for business. Security systems, HVAC systems, roofs, fire protection systems, and other structural improvements to non-residential buildings may also qualify for a Section 179 deduction.

Equipment can be new or used (as long as you weren’t the prior owner). It can be purchased outright, financed, or leased. So, let’s say you want to purchase qualifying equipment for $1 million and you have $250,000 for the down payment and finance the remaining $750,000. As long as the equipment is put into service this year, you can deduct the full $1 million this year.

Through 2026, there’s an added bonus. For expenses not eligible for the Section 179 deduction, there’s a bonus depreciation allowance in year one. For 2023, bonus depreciation is 80% — remember, that’s in addition to regular depreciation. The bonus depreciation decreases for the next three years (60% for 2024, 40% for 2025, 20% for 2026). Starting in 2027, this additional benefit will no longer be available. Because of this phase out, businesses benefit the most by making capital purchases sooner rather than later.

Section 179 numbers to know for 2023:

• Maximum 179 deduction: $1,160,000
• Phaseout threshold begins at $2,890,000 and ends at $4,050,000. (So, if you buy eligible assets that cost more than $2,890,000, your maximum 179 deduction is reduced dollar for dollar by amounts over $2,890,000. Purchases above $4,050,000 are not eligible for a 179 deduction, but bonus depreciation can still apply.)
• Bonus depreciation: 80%

If you need help determining whether to act quick to take advantage of Section 179 this year or whether to make it part of your tax strategy for 2024, your RBT CPA client manager can help – reach out to him/her today. Please remember RBT CPAs is here to help with your accounting, tax, audit, or business advisory needs. Interested in learning more? Give us a call today.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.

A budget can significantly reduce the stress associated with running a veterinary practice – especially during uncertain economic times – by helping you evaluate performance, set goals, measure progress, and make informed short- and long-term decisions and plans. With a budget, you can proactively manage your practice, making the most of it when business is good and successfully navigating more challenging times.

The best place to start is with the basics: Revenue minus expenses equals profits.

Revenue

Revenue is how much money is coming into your business. You should set revenue goals and growth based on a number of considerations:

• Will your annual revenue goals on top line revenue help you achieve goals for profitability?
• Are you setting annual price increases for non-shoppable services high enough to absorb expected increases in prescription drugs, payroll, etc.?
• Are revenue goals achievable based on doctors’ current production levels?
• What can you do – from coaching to adopting new lines of business or services – to help doctors achieve revenue goals?
• Do you review doctor production with associate vets to ensure they reach weekly and monthly goals?

When it comes to revenue, plan on tracking it weekly, monthly, quarterly, and annually so you can see how it may be fluctuating in the short-term; compare it to past performance; and set goals for the future. (You can also use it to identify seasonal patterns so you’ll know when you can afford to increase spending and investments, and when to tighten your belt.)

Expenses

Expenses represent money that is going out of your business. There are fixed expenses which don’t change from month to month and variable expenses. The more detailed you can be about your expenses, the more empowered you are to make informed financial decisions.

• Fixed expenses can include mortgage/rent; certain utilities (phone and Internet); base salaries; property taxes, insurance premiums; and debt repayments.
• Variable expenses depend on use. Certain utilities like oil or electric can vary, as can overtime costs. Account for office supplies, external lab costs, pharmaceuticals, vaccines, inventory costs, over-the-counter medicine (vitamins, flea and tick treatments, shampoos, ointments), pet food, preventive care products, electronic monitoring chips, professional fees (for a lawyer or accountant), new equipment, and cleaning services and supplies.

With expenses on the rise in recent years, it is important to budget for your expenses and expected increases before finalizing revenue goals.

Profit

Profit is the money you have left over. A portion should be used to build an emergency fund (covering three to six months of expenses) so unexpected expenses don’t put you into debt. You may want to allocate a portion for reinvesting into your business. The remainder is how much you make for running your business.

What if there’s nothing leftover or a negative balance? That’s considered a loss. Budgeting will either help you accommodate the periodic loss by planning for leaner months or help you identify immediate actions you can take to turn things around.

Depending on your bandwidth and capabilities, you may decide to set and manage your own budget using spreadsheets or templates; employ software to promote accuracy, insights, speed, and ease; and/or engage an accountant to operate as a part-time Chief Financial Officer to handle the whole process, helping you to understand results and your options for next steps.

If you need help creating, monitoring, or adjusting your budget, remember, your RBT CPAs client manager is just a phone call away. For more information, give us a call today.

RBT CPAs is proud to say all our work is prepared in the U.S.A. – we never offshore. As a result, you get peace of mind that your operation’s financial and confidential information is handled by full-time, local staff who have met our high standards for quality, ethics, and professionalism.