How Section 179 Could Save You a Bundle On Hardware and Software Investments.
I’ve Learned This Year—even more than past years—that your business can save a LOT of money on hardware and software if you take advantage of tax incentives present in Tax Code Section 179.
What can 179 do for your business?
If you purchase qualified equipment and software within the 2016 tax year (that means purchased by December 31, 2016), you will be able to deduct THE FULL PURCHASE PRICE from your gross income.
Let’s say you made some needed equipment purchases totaling $100,000 in 2016—all of which was covered by the Section 179 Deduction. Your cash savings would amount to $35,000! (Assuming a 35% tax bracket). Where else could you save this much money by simply investing in your business?
Why is the government doing this? To encourage economic growth in American, by getting companies to invest within their businesses.
Do You Qualify For 179?
You must meet 2 basic criterion to qualify for big savings:
- If your business purchased, financed, or leased up to $500,000 of new or used business equipment in 2016, you will qualify for the deduction. Note: equipment must be used at least 50% of the time for business purposes to qualify.
To understand the amount of a deduction you will get from a particular purchase, simply multiply the percentage of time equipment is used by your business by the cost of the equipment. Computers and Software DO qualify for the deduction (other investments like land and buildings DO NOT). Please check with your accountant for the nitty-gritty details.
- You MUST have purchased the equipment and software within the tax year you are taking deduction. That means for the 2016 deduction, you must have your purchases in your possession by December 31, 2016! (That means if you haven’t acted yet, the time is ticking!)
Important Changes to 179 in 2016
Congress has changed the 179 tax code slightly (to favor business owners!):
Your Deduction Limit Increased to $500,000—You now can deduct up to $500,000 on new and used equipment purchased this year!
Your Spending Cap Increased to $2 MILLION—Congress increased the limit you can spend on equipment before your 179 deduction reduces (dollar for dollar basis) to $2 MILLION!
Bonus Depreciation for 2016 is 50% and extends through 2019—Once you’ve reached the spending cap of $2 Million, you can take a 50% depreciation for 2016 off new equipment purchases.
Computer Equipment AND Software ARE included in Section 179!
Do you have any computer needs (or even purchases you were eventually planning to get around to!)—servers, laptops, routers, software—all of this is fully eligible for the Section 179 deduction! But Remember, to reap the benefits of 179, you MUST purchase and take possession of the equipment within the fiscal year. Your opportunity to take advantage of this huge tax savings is dwindling.
The bottom line: It’s important you understand Section 179 tax code and how it can get you major tax deductions. Please check with your accountant on the details!
Contact me today by clicking here to fill out a response form or by calling 215-488-7307 and together we will come up with a strategy on how to best to invest in your technology and get the most out of your tax deductions!