We help you acquire and operate revenue-generating medical equipment in a fast-growing, cash-pay corner of the wellness market — high-demand therapies that most insurance won't touch, like Plasmapheresis, EBOO, EBO2/EBO3, and Traumatic Brain Injury protocols. Your entity employs the nurses and technicians, manages scheduling and utilization, and handles the billing. It's a real operating business, already running across six locations — built deliberately around the permanent 100% bonus depreciation rules of §168(k).
This is an operating service business — not a passive equipment lease. That single distinction drives both the economics and the tax treatment, and it's what we build the whole structure around.
Your owner entity buys the medical equipment outright at fair market price — cash or recourse financing, in an arm's-length deal with an unrelated seller. You hold real title and real risk.
The equipment is installed and made operational at a treatment location before year-end, fully documented from delivery through acceptance testing and the first patient — the trigger for first-year depreciation.
Your entity staffs the nurses and technicians, manages scheduling, throughput, and maintenance, and performs the billing for every treatment. You're running a service business, not collecting rent.
Income arrives as your negotiated share of the revenue the equipment generates in a market with strong, underserved demand. You carry genuine ownership risk — utilization, maintenance, obsolescence — and keep the genuine upside.
A bare equipment lease is presumptively passive under §469 — its losses generally can't offset active income, no matter how large the deduction. Our model is built the other way: real services, real staff, real billing. That's not window dressing; it's the legal and economic engine.
Hand over a machine, collect a check, provide no services. The activity is per se a rental — the year-one depreciation loss suspends instead of offsetting practice income or wages, and §179 is barred for noncorporate lessors. The deduction is real but stranded.
When substantial personal services accompany the equipment and the owner materially participates, the activity steps outside the rental box — so the loss is available against other active income, subject to the at-risk and excess-business-loss rules. The deduction works because the business is real.
The deduction is the easy part. Whether the loss is usable depends on three statutory tests — and our structure is designed to address each one.
The services layer — staffing, utilization management, billing — is what moves the activity out of the per se rental box. Owners then materially participate under one of the seven §469 tests, with contemporaneous documentation.
Deductions are limited to amounts genuinely at risk. Placements are funded with cash or recourse debt from unrelated lenders — no nonrecourse seller paper, no guaranteed-return side letters.
For 2026, net business losses offset nonbusiness income up to $256,000 (single) / $512,000 (joint); the excess carries forward as an NOL. We model the cap before sizing any acquisition.
A simplified, hypothetical 2026 example for a joint filer operating through the active model. Outcomes vary materially with individual facts.
| Item | Amount / Result |
|---|---|
| Equipment acquired & placed in service (2026) | $2,000,000 |
| §168(k) bonus depreciation (100%) | ($2,000,000) |
| Year-one revenue share | $300,000 |
| Operating costs (staff, insurance, maintenance) | ($180,000) |
| Net year-one activity loss | ($1,880,000) |
| Current-year offset against other income (§461(l) cap, joint) | Up to $512,000 — remainder carries forward as an NOL against future income, including ongoing revenue share |
Hypothetical illustration only — not a projection or guarantee. Assumes active (nonpassive) characterization, full at-risk basis, and material participation, each of which depends on facts and documentation. Depreciation is a deferral: §1245 recapture applies on exit, and many states do not conform to federal bonus depreciation.
Adjust price and volume to see how revenue flows through cost of goods, debt service, the 50% medical-office share, and the 30% marketing allocation. Average treatment cost for EBOO is $1,250–$1,500. Exclusive equipment cost is $400,000.00.
| Line item | Monthly | Annual |
| Treatment revenue | ||
| − Cost of goods sold | ||
| Net profit (revenue − COGS) | ||
| − Medical office share (50%) | ||
| − Marketing (30%) | ||
| Owner entity share (20%) | ||
| − Debt service (P&I on ) |
Hypothetical model for illustration only — not a projection, guarantee, or offer. Actual reimbursement, utilization, costs, and tax outcomes vary.
Uses the price, COGS, and financing inputs above with volume fixed at 3 treatments/day, 5 days/week (≈65/month). Figures are monthly.
Adjust price and volume to see how revenue flows through cost of goods, debt service, the 50% medical-office share, and the 30% marketing allocation. Plasmapheresis revenue per treatment typically ranges from $4,500 to $10,000. Exclusive equipment cost is $1,200,000.
| Line item | Monthly | Annual |
| Treatment revenue | ||
| − Cost of goods sold | ||
| Net profit (revenue − COGS) | ||
| − Medical office share (50%) | ||
| − Marketing (30%) | ||
| Owner entity share (20%) | ||
| − Debt service (P&I on ) |
Hypothetical model for illustration only — not a projection, guarantee, or offer. Actual reimbursement, utilization, costs, and tax outcomes vary.
Uses the price, COGS, and financing inputs above with volume fixed at ≈2 treatments/day, 5 days/week (≈40/month). Figures are monthly.
Two illustrative 2026 federal scenarios comparing single and married-filing-jointly outcomes, applying the §461(l) excess business loss limitation. Federal income tax only, using 2026 brackets and standard deduction (Rev. Proc. 2025-32).
Wages and Roth conversion income are nonbusiness income, so §461(l) caps how much of the device loss can offset them in year one ($256,000 single / $512,000 joint for 2026). The disallowed portion isn't lost — it carries forward as an NOL.
| Line item | Single | Married Filing Jointly |
| Income (W-2 + Roth conversion) | ||
| Year-one §168(k) device loss | ||
| Loss usable in year one (§461(l) cap) | ||
| Carried forward as NOL | ||
| Federal tax without strategy | ||
| Federal tax with strategy | ||
| Year-one federal tax savings | ||
| Effective savings rate on usable loss | ||
| Tax savings vs. cash down payment | ||
| Net year-one benefit (savings − down payment) |
Device losses first offset other business income without any §461(l) cap — the limitation only applies to losses claimed against nonbusiness income. A business owner with $1.2M of business income absorbing a $1.2M three-device deduction faces no EBL limit at all.
| Line item | Single | Married Filing Jointly |
| Business income | ||
| Year-one §168(k) device deduction | ||
| Deduction usable in year one | ||
| Carried forward as NOL | ||
| Federal tax without strategy | ||
| Federal tax with strategy | ||
| Year-one federal tax savings | ||
| Effective savings rate on deduction used | ||
| Tax savings vs. cash down payment | ||
| Net year-one benefit (savings − down payment) |
Both scenarios are simplified federal illustrations: they apply 2026 brackets and the standard deduction only, and ignore QBI (§199A), AMT, self-employment and payroll tax, the net investment income tax, state income tax (many states decouple from bonus depreciation), and year-one operating results from the device. Depreciation is a deferral — §1245 recapture applies on disposition. Not tax advice; outcomes depend on individual facts. Consult your tax advisor.
No — and that distinction matters. Marketed deals where passive investors buy equipment chiefly to harvest depreciation are an IRS enforcement focus. This model is an operating business: equipment purchased at the retail market price in an arm's-length transaction, real staffing and billing operations, recourse financing, and a credible pre-tax profit objective. The tax treatment follows the economics, not the other way around.
The model is built for owners who materially participate — typically 100–500+ hours per year depending on which §469 test applies, with contemporaneous time logs. Owners who can't participate should expect passive treatment, which changes how losses can be used. We address this candidly in every consultation.
Medical equipment is generally 5-year MACRS property, well within §168(k)'s 20-year ceiling. Both the binding acquisition contract and the placed-in-service date must fall after January 19, 2025. Used and refurbished equipment qualifies if it's your first use and purchased arm's-length from an unrelated party.
Bonus depreciation reduces basis to zero, so gain on sale up to original cost is recaptured as ordinary income under §1245. The deduction is a deferral with real time-value benefits — not a permanent exclusion — and exit planning is part of every engagement.
Potentially, yes. Where referring physicians hold ownership, the Stark Law and Anti-Kickback Statute constrain per-use and revenue-share compensation. Every placement involving referral relationships is reviewed by healthcare regulatory counsel before signing.
Tell us about your situation and we'll schedule a call to walk through the model, the real numbers from live locations, and whether it fits your facts. Straight answers — including when it isn't the right move.
Book a 60-minute Medical Device Tax Strategy session directly on the calendar — or send us a message below.
MH Services LLC is not a law firm, accounting firm, or registered investment adviser, and nothing on this site is tax, legal, or investment advice. Tax outcomes depend on each owner's individual facts and circumstances, including characterization of the activity, material participation, at-risk amounts, the excess business loss limitation, state tax conformity, and depreciation recapture on disposition. Hypothetical examples are illustrations, not projections or guarantees. Equipment ownership involves genuine economic risk, including loss of capital, utilization shortfalls, and obsolescence. Prospective participants should consult their own qualified tax, legal, and healthcare regulatory advisors before entering any arrangement. Arrangements involving referring physicians are subject to the federal Stark Law and Anti-Kickback Statute.