Who could say NO to that?
- Would you like to upgrade your company’s software and computer systems?
- Is it time to improve the online security of your business?
- Could you use a nice 2020 tax deduction?
All these things are possible if you take advantage of a tax opportunity many business owners aren’t aware of called Section 179.
If you handle things correctly, GeeksHD could help you get the software, computer systems and cyber security protection you need right now and not have to wait.
What is Section 179?
Section 179 of the United States Internal Revenue Service (IRS) Code allows business owners to take same year total deductions for certain types of expenses like software and business equipment.
The typical tax deduction for business property is usually parceled out over time based on the useful life of the item. For example, if you purchase software or a computer for your business, and expect to be able to use it for five years, you would deduct the cost of that item from your taxes in increments over a five year period.
Instead of using the traditional write off method, which involves relatively complicated depreciation calculations, you can use Section 179 instead. It allows you to take the complete deduction for the total price of qualifying items the same year you make the purchase and start using them.
In other words: If you buy software, computer equipment and other qualifying things for your business and begin using them before the end of 2020, you can deduct the total price, within limits, from this year’s taxes.
The Section 179 expensing method is offered as an incentive for business owners to grow their operations with the purchase of new equipment. This is particularly valuable during a year like this one, when most businesses are looking for any break they can get.
Contact a GeeksHD expert to find out how we can help you upgrade your business computers, software and cyber security protection using Section 179.
How you can take advantage of Section 179.
Taking a Section 179 deduction involves a simple three-step process.
1. Check that your asset is eligible.
To qualify for a Section 179 deduction, your asset must be:
- Tangible. Physical items such as computer equipment are allowed. Most standard computer software also qualifies for Section 179. Intangible assets (things you can’t see, feel or touch) do not. Buildings and land also don’t qualify.
- Purchased. Leased or rented items don’t qualify. Only things you buy do.
- Used more than 50 percent for business purposes. An asset that’s primarily for personal use but occasionally used for business isn’t eligible.
- Not acquired from someone you’re related to or an entity you have a relationship with. You can’t take a Section 179 deduction for anything purchased from siblings, spouses, parents, grandparents, children or grandchildren, along with companies, trusts and charitable organizations you have a relationship with.
2. Start using the asset.
Section 179 rules require that you have to start using the asset in your business to take the deduction. For example, if you purchase a computer in December 2020 but don’t start using it until January 2021, you would not be able to claim the deduction for your 2020 taxes. You would have to wait until you file your 2021 taxes.
3. Claim the deduction.
You claim the Section 179 deduction on Part I of Form 4562. You must include a description of the item, its cost, and the amount of Section 179 you’re claiming for it on Line 6. If you need more room, you can include a list with Form 4562.
Ready to upgrade your business computers, software and cyber security protection using Section 179? Contact GeeksHD to find out how we can help.
Section 179 limits.
Here are two additional things you need to know about Section 179:
1. The deduction is reduced if you spend upwards of $2,500,000 on qualifying items.
For 2020, you can take a deduction on up to $1,000,000 of eligible property. However, if you spend more than $2,500,000 on qualifying property, your deduction will be reduced dollar for dollar.
What this means: If your organization buys $2,600,000 worth of property this year, you’ll have gone over the limit by $100,000. That means your maximum Section 179 deduction will be reduced to $900,000 ($1,000,000 minus $100,000).
2. Your net business income is the deduction cap.
Your Section 179 deduction is also limited to the net income of your business for the year. You can’t deduct more money than you made.
Example: If your business has a net income of $75,000 before taking the Section 179 deduction, and you buy $100,000 worth of qualifying property, your deduction is capped at $75,000. You’re able to carry the remaining amount to next year or take regular depreciation on it.
What are you waiting for? Year end is fast approaching. Contact GeeksHD to find out how we can help you upgrade your business computers, software and cyber security protection using Section 179.