Tax Implications of EMR Stimulus

One of the questions that was asked at the AAFP conference I attended was, “Is the EMR stimulus money taxable income?

The short answer is: Yes.

I think the better answer is that it’s a bonus on your Medicare or Medicaid reimbursement, so it will be taxed in the same way that your Medicare reimbursement is taxed. Would Uncle Sam have it any other way?

One person commented that it’s essentially money in and money out and so that means it’s not really taxed. This is mostly true. If you spend $44,000 on an EMR (which you are very likely to do) and you get $44,000 in EMR stimulus money, then that would essentially mean you aren’t paying taxes on the stimulus money.

This calculation of course doesn’t work for someone who already has an EMR, because they’ve already realized the tax benefits of purchasing an EMR in the year(s) that they spent the money on their EMR.

I wonder if the CBO took into account the tax impacts when they estimated how much of the ARRA stimulus money would be spent on EMR….errr…EHR.

Partial Disclaimer: I am not an accountant and I don’t play one on TV. I’m sure a real CPA will be happy to correct anything I might have said incorrectly in the comments.

About the author

John Lynn

John Lynn

John Lynn is the Founder of the HealthcareScene.com, a network of leading Healthcare IT resources. The flagship blog, Healthcare IT Today, contains over 13,000 articles with over half of the articles written by John. These EMR and Healthcare IT related articles have been viewed over 20 million times.

John manages Healthcare IT Central, the leading career Health IT job board. He also organizes the first of its kind conference and community focused on healthcare marketing, Healthcare and IT Marketing Conference, and a healthcare IT conference, EXPO.health, focused on practical healthcare IT innovation. John is an advisor to multiple healthcare IT companies. John is highly involved in social media, and in addition to his blogs can be found on Twitter: @techguy.

4 Comments

  • @John… I’m not an accountant and don’t play one on TV either.

    First … CBO had no role in deciding how much of ARRA funds would be allocated toward implementing EHRs. That’s not what they do.

    Really do need a CPA to answer the question. The $44k is taxable revenue for services provided in the tax year in which the practice is paid.

    The cost of establishing an EHR is a business expense … but more appropriately a capital investment that must be depreciated over the lifetime of the asset in order to claim a tax benefit.

    I’m not a CPA … but I don’t think you an consider the $44k received in higher reimbursements to be a wash against EHR adoption equipment, software, training, staffing, and lost earnings costs.

  • @DonB
    I never said that the CBO had a role in determining how much would be allocated for EHR. However, they take those numbers and estimate how much those numbers will amount to based on number that will get it, savings to the government, etc and one part of that calculation could be the tax they’d get back from the increased revenue.

    Sure a CPA needs to answer it officially. In fact, it’s much more complicated than what you mention. Mostly because you don’t get all of the $44k up front. Instead you get it in payments over 5 years. Plus, you can pay for your EMR in a hundred different ways and so the way you handle that expense could be very different based on how you pay for your EMR. Thus why a CPA firm is interested in helping doctors with their EMR purchase!

  • To the OP … okay … CBO better have factored the tax revenue from ARRA payout… they also better have projected the gross tax implications of EHR adoption capital depreciation. That’s what they get paid for.

    Sure as heck bet that nobody else in the Administration or legislature did though.

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