Reduce Your Tax Liability & Save Money By Purchasing New Technology Before December 31st
The new 2018 Section 179 Tax Deduction has increased the amount you can deduct on your technology purchases from $500,000 to a whopping $2.5 Million! Even better, you can take these deductions immediately. This means you can lessen your taxable income and ultimately your tax burden. That’s real money in the bank!
This is an incentive that is particularly attractive and meaningful for small and medium-sized businesses (SMBs). The IRS Section 179 Tax Deduction was enacted to help SMBs take a depreciation deduction for assets like technology equipment and off-the-shelf software in one year, rather than depreciating them over five to six years.
The federal government is offering this incentive to stimulate the economy. It’s not permanent – and it’s something that could change in the years to come. So, you should definitely take advantage of this now.
You can take a tax deduction for any equipment you need to operate your business. Some examples are IT equipment, computers, copiers, printers, servers, routers, firewalls and new phones. Taxable income is your gross income minus any deductions or exemptions allowed in the tax year. Taking tax deductions will reduce the income you are taxed on. Lower taxes mean money in the bank for you.
Deductions are all about limiting your tax burden by reducing your taxable income. Taxable income is defined as gross income, or adjusted gross income, minus any deductions or exemptions allowed in the tax year. An example of a deduction or exemption is depreciation.
Here’s what you need to know about the 2018 Section 179 Tax Deduction:
The 2018 Section 179 Deduction lets you deduct the cost of an asset immediately rather than spreading it out over its useful life. Section 179 is only available to U.S. companies.
$1,000,000 is the 2018 deduction limit for both new and used business equipment, and off-the-shelf software. If you want to take the deduction for the tax year 2018, you must purchase or finance it between January 1, 2018, and December 31, 2018.
$2,500,000 is the maximum amount that you can spend on technology equipment to be eligible for the Section 179 Deduction. After the spending cap of $2,500,000 is reached, you can take a Bonus Depreciation equal to 100% of the purchase. Plus, you can even take the 100% Bonus Depreciation for the technology you purchased and placed into service on or after September 27, 2017. Bonus Depreciation isn’t always offered. So, the 100% for 2018 is something you should take advantage of now.
Depreciation is a means for you to recover the cost of a purchased asset over time through periodic deductions or offsets in income. It’s considered a tax benefit because depreciation deductions cause a reduction in taxable income, thereby lowering your business’s tax liability.
Here’s how it works:
When you buy business or IT equipment you usually write off the expense a little at a time – this is depreciation. For example, if you buy hardware for $50,000, you would typically depreciate it over the course of five years at $10,000 per year. However, now with the 2018 Section 179 Tax Deduction, you can write off all of it in the year you purchased it. This lowers your tax liability. Plus, it’s an incentive to purchase more technology equipment if you need to.
The purpose of the IRS 2018 Section 179 Tax Deduction is to stimulate the U.S. economy (and your business). Here’s an example of how this works:
Total 2018 Technology Purchases………. $2,000,000
1st year write off………………………………$1,000.000
Bonus depreciation ………………………….$1,000.000
Total 1st Year Deduction……………….$2,000,000
At the new corporate tax rate of 21%, this means you’ve saved $420,000 on this purchase! This is a huge opportunity to save that you should take advantage of.
What Type of Technology Equipment Qualifies for the 2018 Section 179 Tax Deduction?
Equipment you purchase via a capital lease, cash sale or a dollar buyout, qualifies. This would include equipment like:
Note: Land and buildings are not considered to be qualified property.
As the owner of your new technology equipment, you get the benefits of depreciation. Depreciating it immediately within one year makes sense, because we all know that technology is evolving quickly, and to stay competitive you need the newest, most up-to-date technologies.
To take advantage of the 179 Deduction, the technology equipment you purchase must be set up and running by the end of 2018.
Section 179 was enhanced to help you deduct the full amount of your business and IT equipment purchases over one year. It’s a great incentive for you to purchase, finance or lease most types of general business equipment, technology solutions, and off-the-shelf software. These deductions will greatly limit your tax burden and save you money by reducing your taxable income. With technology advancing as rapidly as it is, this is the perfect opportunity to ensure your IT infrastructure is the most up-to-date, reliable, efficient and secure that it can be.
Taking advantage of Section 179 and the Bonus Depreciation could be the most profitable decision you make in 2018.
Be sure to consult your tax specialist to confirm how you can benefit from these or other tax incentives.
For more information about how you can benefit from these great tax incentives, and improve your technology at the same time, contact the Centerpoint IT technology experts in Atlanta, GA at (404) 781-0200 or firstname.lastname@example.org.