• LA: (337) 474-4249 TX: (409) 724-0440
  • Lake Charles, Louisiana 2950 Country Club Lake Charles, LA 70605
  • Nederland, Texas 2909 Spurlock Rd Nederland, TX 77627

Many small businesses are taking advantage of new deductions in Section 179 of IRS tax law. This depreciation deduction applies to certain assets purchased in one year. These can be depreciated over a more extended period, making them much more comfortable on the budget.

What Is Section 179?

On January 2, 2018, H.R.1 was signed into law. It revised several previous tax laws going forward. With the passage and signing of H.R.1, the deduction limit for Section 179 increased to $1,000,000 for 2018 and beyond. Also, the limit on equipment purchases was increased to $2.5 million.

The IRS 179 Deduction was enacted to help small businesses lessen their taxable income, thereby reducing their tax burden. Business owners can now take a deduction equal to the full purchase price of a qualifying piece of equipment. That makes this a great time to buy computers, servers and expensive equipment for your business.

You must buy (or lease/finance) equipment, and put it into use, by midnight 12/31/2018 to take advantage of Section 179 this year. These types of business deductions always expire at midnight on the last day of the year.

The Bonus Depreciation

Bonus depreciation of 100% was made retroactive to 9/27/2017. This depreciation is good through 2022 and it now includes used equipment.

The Tax Cuts and Jobs Act (TCJA) extends the Bonus Depreciation through 2026 (2027 for certain assets). There were other changes made to write off the types of assets that qualify for Bonus Depreciation, as well as the percentages.

The 100% deduction remains in place for five years until 2022. In 2023, the depreciation percentage will be reduced by 20% each year until it finally runs out in 2026. The reductions will look something like this:

  • 80% deduction for assets acquired in 2023.
  • 60% for assets acquired in 2024.
  • 40% for assets acquired in 2025.
  • 20% for assets acquired in 2026.
  • For 2027 and beyond, deductions are eliminated unless changes are made to the tax code by the IRS.

Can You Qualify If Leasing or Financing Equipment?

Business equipment (including hardware and software) still qualify for Section 179 deductions even if it’s leased or financed. The equipment must be placed in service for business purposes by the last day of the year to qualify.

If you purchase equipment under a Capital Lease, cash sale or a dollar buyout, it will qualify for the deduction. You must be the owner of the equipment and maintain full control of it.

Examples of Eligible Technology Equipment

These are typical products that may qualify for the 179 deductions:

  • Routers and Firewalls (Replace these every 2-3 years for security purposes.)
  • Switches (Take advantage of the newer, faster switches that are available today.)
  • Off-the-Shelf Software (software that’s not customized for your business)
  • Wireless Access Points
  • Servers (These should be replaced every five years.)
  • Backup & Disaster Recovery Appliances (Do you have a reliable system that will support your business if you suffer from a natural or manmade disaster?)
  • Phone Systems (VoIP or traditional)
  • Laptops and Ultrabooks (Get faster computers with touch-screens, longer battery life and other perks.)
  • Workstations and Monitors (Add a 2nd monitor for your key staff to increase productivity.)
  • Printers & Scanners
  • Battery Backups (You need these when the power goes down.)
  • Storage SAN- Storage Area Networks, RAID-Redundant Array of Independent Disks, etc. (Digital picture files require lots of storage space.)

Ways to Save

Tax codes for businesses can be complicated, but the goal of Section 179 is a simple one: to encourage companies to spend more to do more. Businesses large and small would be wise to make the most of these tax benefits, and leverage them to plan for the future. A certified accountant can walk you through these changes and help you make educated decisions when investing in equipment for your business.

This is a substantial deduction that you should take advantage of if you need to buy new equipment for your business. You can lessen the financial impact while improving productivity. If you need advice about making technology-related purchases, the team at National Networks can help. We’ll assist you in finding and buying the best solutions for your business needs. Streamlining your processes and workflows can pay off for years to come.

National Networks serves Southwest Louisiana and Southeast Texas with professional managed IT services. For your convenience, we have offices in both Lake Charles, Louisiana and Nederland Texas. Contact us at (337) 474-4249 or (409) 724-0440.

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Published on 1st December 2018 by Shawn Maggio