Tag: tax savings

  • Maximizing your tax deduction potential with Section 179

    Maximizing your tax deduction potential with Section 179

    It’s September which means we’re almost to the fourth quarter where most businesses look ahead towards end of year activities, it’s not unusual for us to see an increased interest in locking down new equipment and upgrades before year end.

    Each year we begin promoting the benefits of Section 179, you can learn more about it in our updated guide for 2023 or continue reading.

    In a nutshell, Section 179 is a tax savings benefit that allows you to deduct the cost of equipment you use for work from your (in some cases up to 100% of the total cost) from your tax expenses. When used correctly, this means you can purchase upgrades for your business and receive that money right back into your business when you file the following year.

    Section 179 is a permanent part of the tax code here in the United States but that doesn’t mean it’s static. Each year the deduction limits are adjusted for inflation. You can see on the chart below what this year’s limits are.

    You can choose to take the deduction in one lump sum or take a deduction for depreciation each year instead – it’s completely up to you.

    What equipment or technology purchases qualify for Section 179?

    1. New Equipment: This includes computers (as long as they’re used in your business at least 50 of the time), servers, backup devices, phone system hardware and more.
    2. Components: Such as hard drives and solid-state drives, RAM, video cards, monitors and more.
    3. Refurbished Equipment: You don’t have to buy new equipment to qualify for Section 179, in fact if you’re in the market for a new server and have been debating new vs refurbished, we have an article where we weigh in here. Equipment can also be financed or leased and still qualify.
    4. Software: If you’re looking to purchase software upgrades for your business this year – such as upgrading an older copy of Windows to the latest version – these would also qualify.
    6. Professional Services: Even professional services like ours can possibly be deducted under Section 179.

    We find many businesses are looking to make purchases before the year end because that’s when a clearer picture of their financials is available but be warned. For a purchase to qualify in 2023 these purchases must be made before December 31st. Even if the purchase was planned as part of this year’s budget, if it’s purchased January or later it will not count for this year’s taxes.

    If you’re looking for the exact math on a potential purchase and the savings you will net, we can recommend this calculator, it has been updated for 2023. It’s also important to note that the ceiling for your particular business is your net income, you cannot deduct more money than you made that year, however you can carry the deduction forward to the next year.

    We’ve spent some time discussing what does qualify under Section 179, but what about what doesn’t? The following items would not qualify under Section 179:

    1. Intangible Assets: This would include things like patents or copyrights as an example.
    2. Land: You cannot purchase land and claim a deduction for Section 179.
    3. Purchased from family: Unfortunately, you cannot claim purchases that are made through a family member. Even if the product itself would normally qualify, if the item was purchased through a sibling, parent’s or spouses’ separate business it will not qualify.

    Interested in making technology upgrades in your business and utilizing Section 179 in 2023? Valley Techlogic can help, we offer procurement services as well as technology solutions that are covered by this very useful tax code. Learn more today by scheduling a consultation.

    Looking for more to read? We suggest these other articles from our site.

    This article was powered by Valley Techlogic, an IT service provider in Atwater, CA. You can find more information at https://www.valleytechlogic.com/ or on Facebook at https://www.facebook.com/valleytechlogic/ . Follow us on Twitter at https://x.com/valleytechlogic.

  • Need computers for your office? Purchasing before the New Year could save your business a ton of money

    Need computers for your office? Purchasing before the New Year could save your business a ton of money

    Every year we promote the tax savings benefits of Section 179 to our clients, new clients are often not aware that the computer hardware (and even some software) they use in their business is a tax deductible expense. Making these purchases before year end saves them a boat load of money on the next years tax bill and effectively works as a discount on the equipment they need.

    What is Section 179? Section 179 is an immediate tax saving deduction on any depreciable asset – such as vehicles, hardware and software. Rather than depreciating these items in future tax years and having to track that, you can benefit from lowering your liability right now.

    This especially helps our clients when making larger technology purchases such as replacing aging servers. A new server can easily run $10,000 or more, but when you factor in the benefit of Section 179 it makes for a sizeable discount on a purchase of that size.

    The maximum discount for 2022 is $1,080,000, so the sky is the limit no matter what size purchase you’re planning to make. To maximize the benefits however, we do find that making these purchases at the end of the year is the most beneficial as you see the deduction much sooner when rolled into the next years taxes.

    Here’s a chart on what a $10,000 purchase would look like after utilizing Section 179:

    Of course, every business set up is different and just looking at the numbers may not give you enough of an idea of how you can use Section 179 in your business, so we also made this chart of things our clients often look to do before the year ends that may be an inspiration to you as well.

    Software is a great way to use Section 179 this year in particular, with Windows 7 and 8 for desktops and Windows Server 2012 all losing mainstream support access in 2023.

    While you’re looking to upgrade your Windows software you will probably also want to consider new hardware, the useful life expectancy for computer hardware and servers is around 5 years with typical use and any machines that came from the factory with Windows 7 or Windows Server 2012 installed will be well past that window.

    You may also not know that Microsoft has announced it will no longer allow updates for their Office suite of software on outdated machines, so the time is ticking to get those upgrades done before your office staff loses the ability to use Office software on their devices. You can learn more about the updates coming from Microsoft in 2023 with our free guide here.

    If you’re looking for assistance in procuring technology solutions for your business, Valley Techlogic can help. We have partnerships with Microsoft, Dell, and Lenovo as well as other technology vendors and can help you replace aging equipment easily before time runs out on the benefits of Section 179 this year. Reach out today to learn more.

    Looking for more to read? We suggest these other articles from our site.

    This article was powered by Valley Techlogic, an IT service provider in Atwater, CA. You can find more information at https://www.valleytechlogic.com/ or on Facebook at https://www.facebook.com/valleytechlogic/ . Follow us on Twitter at https://x.com/valleytechlogic.