by Mike Mazan
As a business owner, you have the ability to invest in capital equipment while writing off the full cost immediately using Section 179 of the tax code. Section 179 of the United States Internal Revenue Code allows taxpayers to deduct the cost of certain types of property, including technology and other equipment, on their income taxes as an expense, instead of requiring the cost to be capitalized and depreciated.
Over the years, this handy tax code has helped many businesses and entrepreneurs write off a large portion of their technology and equipment purchases, ultimately enabling them to save a significant amount of money. So how does this benefit your business? Well, for example, if you choose to buy a new computer for your office, you’re able to deduct a portion of the cost of that computer in one year.
Section 179 Tax Deduction Limit for 2014 Has Significantly Dropped – But Don’t Forget to Take Advantage of the Tax Code Nonetheless!
In 2013, the tax deduction limit was set at $500,000; the limit has significantly dropped to $25,000 as of January 1st, 2014. While it’s a substantial decline, it’s still a great opportunity to procure new technology and software, then deduct a certain amount of the purchase cost.
There has been activity in Congress to raise Section 179 limits. However, efforts have been stalled in the Senate. If you have the need to spend more than $25,000, then watch the news closely as we near the end of the year to see if there is any action that might raise the limit for this year.
Keep in mind; the IRS says business property must be tangible, depreciable, personal property, which is acquired for use in the active conduct of a trade or business.” Also, these are a few limitations to consider:
- The property must be used primarily for your business, however, property used for personal and business purposes can be deducted, as long as the property is used for business more than half of the time. The amount of your deduction will be reduced by the percentage of personal use.
- The property must be used over half the time for business in the year you’ve purchased it, which means you’re not allowed to convert property that was previously used for personal use to business use and you must maintain documentation to prove the use of the property.
Fortunately, your business can also lease technology and equipment while taking advantage of the tax deduction – often, leasing technology and equipment, including software, is the preferred choice for many businesses as it allows you to take advantage of the latest and greatest solutions while maintaining cost-efficiency.
Looking for more information on Section 179? Give your Account Manager a call at (703) 961-1840 or send us an email at firstname.lastname@example.org. SolutionWorx is here to help you understand and take advantage of this helpful tax code to save your business significant amounts of money!