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 explainedSection 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 limitationsThe 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 DeductionsTangible 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 explanationThis 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