I bet it’s no surprise to you that at High Touch Technologies, we’re kind of technology geeks. For us, little can beat the speed, functionality, and productivity-boosting power of new equipment. Do you know what’s even better? The opportunity to buy new tech at a fraction of the cost.
As the year winds down, businesses can strategically spend their remaining end-of-the-year dollars to take advantage of the Section 179 tax deduction. Through this tax deduction, eligible businesses can deduct the purchase price of qualified hardware and off-the-shelf software.
If you have leftover money in your budget that’s burning a hole in your pocket, or if you have substantial upgrade purchases coming your way in 2020, now is a smart time to plan and purchase equipment.
What Is Section 179?
We know that tax language isn’t the easiest to get through. The Section 179 tax deduction is an economic incentive offered by the U.S. government to encourage companies to invest in their business’s longevity by making qualified equipment purchases.
In conversational terms, the Section 179 tax deduction helps reduce your business’s cost of purchasing new hardware and off-the-shelf hardware. For 2019, businesses that purchase, finance, and/or lease new or used equipment can qualify for the Section 179 deduction. That means, if you buy, lease, or finance a piece of qualifying equipment, you can deduct the full purchase price from your annual gross income.Read The Bill
What Technology Products Qualify for the Section 179 Deduction?
- New equipment. Workstations, servers, on-site backup devices, hard drives, phone system hardware, etc.
- Used equipment. Any of the equipment above that has been refurbished or resold
- 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.
To qualify for the Section 179 deduction, the hardware and off-the-shelf hardware you purchase must be placed into service on or before December 31, 2019. In addition, these products must be used for business purposes at least 50% of the time. You must use qualifying software for income-producing activity and expect it to be in use for at least one year.Technology Hardware
How Does Financing Equipment and Section 179 Work?
Applying the Section 179 deduction when you purchase equipment is straightforward—you buy equipment and follow the steps provided by the IRS to deduct the purchase price from your gross income.
As mentioned, you can also lease or finance equipment in 2019 and still take advantage of the Section 179 tax deduction. This strategy can be particularly advantageous for budget-focused businesses that need to make essential hardware or off-the-shelf software upgrades.
Through the Section 179 deduction, businesses can deduct the full purchase price of financed equipment and/or software without paying the total purchase price upfront. In fact, the amount you deduct from your 2019 tax burden can exceed your payment amounts, which makes the Section 179 tax deduction a bottom-line friendly decision.Section 179 Example
Section 179 Deduction Limits and Spending Cap
- Deduction limit. $1 million
- Spending cap. $2.5 million
According to Section179.org, the spending cap is the maximum amount that can be spent on equipment before the Section 179 deduction available to your company begins to be reduced on a dollar-for-dollar basis. Larger businesses that spend greater than $3.5 million on equipment are ineligible for the Section 179 deduction.
High Touch can help you determine the right technology solutions to help your business take full advantage of the Section 179 deduction before the end of the year. Contact us to learn more.Get In Touch
The Section 179 tax write off for purchased, financed, or leased equipment expires 12/31/2019. Bonus deduction is available on equipment placed in service on or before 12/31/2019. This blog does not serve as tax advice. High Touch Technologies urges you to consult your tax professional before making a purchase.