With the end of the fiscal year coming to a close, and tax time coming shortly thereafter, there really are multiple reasons to purchase your new IT equipment before the new year begins. While some corporations may have the goal of showing full usage of an IT budget before the end of the year, there are perks for smaller businesses as well. Purchasing new software, smartphones, computers, servers, printers, and network equipment for your business can count for a tax deduction for up to $25000.
Here are some basic guidelines that you need to know:
- The deduction limit for Section 179 is $25,000 and is good only for 2015. Purchases must be made or financed by Dec. 31, 2015.
- If you buy (or lease) equipment that qualifies under this Section, you may deduct the entire purchase price from your gross income.
- There is a spending cap of $200,000 for equipment purchases. Spend more, and the Section 179 deduction available to your company will begin to be reduced on a dollar for dollar basis. The spending cap makes this particular tax break a true “small business incentive” created especially to provide tax relief to small business owners and to encourage small firms to invest in new equipment to grow their businesses. As part of the recent stimulus bills designed to boost the economy and help manufacturers, small businesses are the biggest beneficiaries of the current Section 179.
- The types of equipment that may qualify for the tax break (double-check with your professional tax advisor before buying or leasing) include:
- Laptops, tablets, PCs and smart phones
- Software for Windows and other off-the-shelf software programs
- Network equipment, including security hardware/software
- Printers, servers and server upgrades
- The equipment must be primarily intended for business purposes – or used for business more than 50 percent of the time it is in operation.
- In previous tax years, after a business had reached the spending cap for Section 179, bonus depreciation would kick in for eligible new equipment. Bonus depreciation is not available for the 2015 tax year. Another major change is the revision of Section 179 to alter the way it was used to write-off vehicle purchases. The so-called “SUV tax loophole” has been significantly reduced. Your tax professional can update you on how the 2015 tax code affects business vehicles.
To read more about the details of this IRS rule go here.
If you’ve been putting off replacing that MS Server 2003, or replacing some old workstations, upgrading before the year’s end will not only make your IT staff or consultants happy, but could work in your favor to lessen your 2015 bill to the IRS. If you need help with finding out what would benefit your business the best, please fill out the brief contact form below and one of our engineers will be in touch to discuss further.