Tax Section 179- Benefits of Upgrading Your Business Technology

7 Ways  Business Owners can Benefit by Section 179 Tax Deduction in 2021

1. What is Section 179 Tax Deduction?

Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment (which includes software, hardware and the service associated with it) purchased, leased, financed during the tax year. For all the qualifying equipment you buy or lease, you get to deduct the full purchase price from your gross income.

2. What business equipment qualifies for Section 179?

Tangible. Physical property such as furniture, equipment, and most computer software qualify for Section 179. Intangible assets like patents or copyrights do not. Buildings and land also don’t qualify, although some equipment attached to the building does, including things like fire suppression systems, alarms, and air conditioning units.

3. How does computer technology qualify for the Tax 179 Deduction?

Computer Technology- Used more than 50% in your business. An asset that is primarily for personal use but occasionally used for the business isn’t eligible.  In general terms, “off-the-shelf” computer software that (a) is not custom designed, and (b) is available to the general public is qualified for the Section 179 Deduction in the year that you put the software into service. This includes workstations, servers, on-site backup devices, hard drives, phone system hardware, etc.

4. Can I write off software as a business expense?

The entire cost of purchased software can be deducted in the year that it's placed into service. ... Additionally, if you buy the software as part of your purchase of all or a substantial part of a business, the software must generally be amortized over 15 years.

5. What is Off-the-shelf software?

Software that’s available to the public that hasn’t been custom engineered. You must use the software for income-producing activity and expect it to be in use for at least one year.

6. Is there a Deduction Limit for 2021?

The Section 179 deduction limit for 2021 is $1,050,000. This means your company can deduct the full cost of qualifying equipment (new or used), up to $1,050,000, from your 2021 taxable income. This deduction is good until you reach $2.62 million in purchases for the year.

7. What is the deadline for a Section 179 Deduction?

You can deduct all or part of the cost of equipment that is purchased or financed and put into place before December 31, 2021. The only stipulation is that the equipment needs to qualify for deduction, and you must start using the asset in your business to take the deduction. For example, if you purchase a piece of equipment in December of 2021 but don’t start using it until 2022, you will have to wait until 2022 to claim the Section 179 deduction for that asset.

In conclusion, claiming the Section 179 deduction can be a huge tax break for your small business, especially if you decide to purchase needed computer software and hardware before year-end. There are a few Section179 limits. If you’re wondering how it will impact your deductions, talk to your accountant, or tax advisor before making any big decisions. Take advantage of this tax break now by contacting our team at MIS Alliance to help guide you as to which computer technology products and services are right for you to help keep your business running securely and effectively while saving you money.