If your company is upgrading computer software or hardware, now might be the right time to save lots of money for your business. Lots of small and medium-sized business owners will be familiar with some of the available tax deductions. However, as far as Bonus Depreciation and Section 179 tax deduction are concerned, many smaller business owners often believe these to be more complicated. This blog will help you understand how business technology upgrades use Tax 179 deductions.
179 Tax Deductions technology explained
Section 179 is an incentive for smaller businesses to finance, lease or purchase equipment by allowing up to $1,050,000 each year, deducted from taxable income for qualified business equipment purchases.
There are limitations on types of equipment and the amounts that they deduct. The Section 179 allowances mean that small and medium-sized businesses can make significant savings.
179 Tax Deductions and limitations
The max we can deduct is $1,050,000, and we can purchase for the full deduction at $2,620,000. Therefore, if purchased equipment costs more than $2,620,000, then the Section 179 deduction decreases at a rate of dollar for dollar and will reach zero when the cost of equipment reaches $3,670,000.
Types of property that qualify for 179 Tax Deductions
Tangible property by the IRS use The Section 179 tax deductions . The equipment must last over one year for the business. Possible purchases include:
- Office equipment
- Computer software
- Computer hardware
- Qualified improvement property
- Some listed property
Bonus depreciation – an explanation
This tax law is an incentive for small and medium-sized businesses to have a deduction on qualified purchases for their first year. For the year that the business buys and uses the equipment, they can deduct 100% of the expense and depreciation too.
Businesses are allowed to take both Bonus Depreciation and Section 179 allowances. However, you must apply Section 179 first. After the Section 179 limit of $1,050,000 has been reached, the rest is taken as bonus depreciation.
Time to upgrade?
If you're considering upgrading your business technology through the 179 tax deduction, now is a perfect time. You can use these purchases under Section 179.
- Laptops, tablets, workstations, and smartphones
- Printers, servers, and server upgrades
- Network switches, network security appliances, and routers
- Microsoft Dynamics and Microsoft Office
- Other software off-the-shelf
Benefits of upgrading your business technology
By upgrading business technology, small and medium-sized businesses can save a lot of money while staying ahead of the competition. Upgrading technology will help your computers run faster. Work time is lost when computers take time to boot up. Smaller businesses feel this time lost much more than bigger companies. With upgrades in technology, productivity increases resulting in less downtime.
If it’s been a while since you invested in new technology, your devices might be wearing out. With older computers, any new software you purchase might not run correctly or may run much slower than it should. So investing in new technology and making the most of the Section 179 deductions is a huge opportunity.
How we can help
As an MSP, we believe it's important to let you know how your business can make the most of IT infrastructure and services to achieve outstanding business performance. The Section 179 tax deduction is an example of how your business can help its bottom line while improving its IT infrastructure. Contact us
for a Business Technology Audit today to see how we can help you and your business.