Tips for Optimizing Pharmacy Taxes

Drug Topics JournalDrug Topics March 2021
Volume 165
Issue 3

Owners can use the cash accounting method to optimize tax savings.

pharmacy taxes

Numerous COVID-19 relief funding programs in 2020 gave pharmacies access to extra cash flow but added uncertainty in an already tumultuous year. With most independent pharmacies receiving Paycheck Protection Program (PPP) relief loans, Congress granted these pharmacies a last-minute gift, and some certainty, with the passage of the Consolidated Appropriations Act, 2021 (CAA) on December 27, 2020. This bill changed how the PPP would be taxed and essentially made it nontaxable. Add in other taxpayer-friendly provisions from the CAA, such as the nontaxability of Small Business Administration (SBA) debt relief and Economic Injury Disaster Loan (EIDL) grants, among others, and pharmacies ended the year with thousands in tax savings potential with the stroke of a pen.

Consequently, many pharmacies optimized their taxes, and cash flow, without having to do anything. For those who may still face a tax liability for 2020, there is little room to limit that tax liability after the tax year has concluded. However, there is one last-minute planning idea that, surprisingly, I often see not being used. This strategy can still be implemented before you file your taxes for 2020.

Cash Accounting Method

The Tax Cuts and Jobs Act of 2017 allows pharmacies to report, for tax purposes, on the cash method of accounting instead of the accrual method of accounting beginning in tax years after December 31, 2017. Many pharmacies already take advantage of these new rules but we often see pharmacies still not optimizing this generally easy tax-planning tool. 

Read the full article on Total Pharmacy.

Related Videos
fake news misinformation | Image Credit: Bits and Splits -
© 2024 MJH Life Sciences

All rights reserved.