Section 179 of the IRS tax code was created to benefit businesses, it's simple to use, and valid on most types of equipment. Section 179 presents an opportunity for your organization to immediately and substantially reduce your tax bill, greatly help your bottom line, and clean up your balance sheet. If you've been planing on upgrading your business technology, this is a great opportunity to do so and have the IRS pay some of the cost.
IRS Section 179 Explained
Section 179 of the IRS tax code is one of the few government incentives for small businesses. The code allows you to deduct the cost of certain types of property as an expense, rather than requiring the cost of the property to be capitalized and depreciated. Write off the full amount for qualifying technology and software purchases in 2020.
What Purchases Are Eligible Under 179?
The majority of business equipment you use everyday are eligible for deductions under 179. The main stipulation is that it was purchased between January 1 and December 31 of the tax year. Purchases that are covered under Section 179 include:
- COTS Software
- Business vehicles
- Office equipment
- Office furniture
- Specific improvements to existing buildings
- Equipments (machinery) purchased for use in business
Twinstate Technologies provides many solutions, including workstations and software upgrades, servers, business phone systems, and firewalls that are covered under Section 179. Software has proven to be the most popular way to use the 179 deduction, and qualifying software is easy to identify. However there are a few pieces of software that are not eligible for section 179 deductions including:
- Custom code
Qualifying software must be used for income-producing activities, have a determinable useful life, and be expected to last more than one year. As long as the software hasn't been substantially modified or customized for you and is available to general public, it is likely to qualify for the 179 deduction.
Section 179 Guidelines:
- Spending cap: $2.5 million
- Deduct up to: $1 million
- Bonus Depreciation: 100%
- This deduction is available for both new and used equipment and will by applied only after the spending cap is reached.
How Much Money Can Section 179 Save My Business?
Don't leave any money on the table. While cost savings will vary by business, Section 179 deductions can have a serious impact on your equipment costs, no matter the size of your organization. Use the Section 179 Tax Deduction Calculator to estimate your savings.
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To take advantage of the tax savings afforded by Section 179, businesses must make their investments on or before December 31, 2020. You should speak with your CPA to fully maximize your tax savings but in the meantime we're standing ready to deliver you a quote for our Section 179 eligible solutions. If you’ve already purchased qualifying equipment this year, you can simply take the Section 179 Deduction when you file your tax return. Just make sure to keep records of the equipment you bought, where you bought it, and when it was installed.
Originally published on Nov 11, 2020 2:21:39 PM