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As the business year winds down, companies wonder what to do with their earnings—while also grappling with the reality of taxes.But what if there was a way to turn a slice of taxable income into a tax-free investment for the business?Enter IRS Section 179. Section 179 is like a secret weapon, allowing you to deduct the cost of newly acquired business equipment from your yearly taxes.WEBIT Services has provided IT services for the Chicago area for over 25 years. In that time, it's become a reliable IT strategist, helping its clients choose when to invest in and utilize new technology..By reading this article, you will learn what Section 179 is and how it can help your business.
Simply put, IRS Section 179 is a tax deduction code for businesses. It lets you deduct the entire cost of recently bought or leased company assets like furniture, software, and computer equipment.In the past, businesses would spread the cost of new equipment over its useful life, writing off a bit each year. For instance, if you spent $20,000 on new office computers, your accountant might deduct $4,000 of depreciation yearly for five years.But with Section 179, you can deduct the total depreciation (in our example, $20,000) in the year you purchase the equipment. The total price is taken out of the taxable equation entirely.For 2023, the magic number you can deduct under Section 179 is up to $1,160,000 of eligible equipment. In some years, you can also include a bonus depreciation. In 2023, it's offered at 80%.
Equipment or software must be bought and actively used within the same year to qualify for the Section 179 tax write-off. For example, a company truck purchased in 2021 would not qualify for a deduction in 2023. The truck must be bought and used in 2023 for a Section 179 deduction in 2023.It doesn't have to be brand new, but it has to be "new to you." Also, you can't buy it from your cousin or any other family member.In addition, the equipment or software must be for business purposes, not personal use, more than 50% of the time. You couldn't buy a new company car or computer and only use it at home. It must be used for business tasks more than half the time.Eligible items include common things like:
The focus is on tangible assets, so buildings and land don't count.For more details, check out IRS Section 179's official website, section179.org.
Originally designed to help small businesses, Section 179 is a great resource for businesses of all sizes. It allows businesses to invest in themselves rather than taxes.By deducting the cost from taxes, Section 179 lets businesses invest in much-needed equipment right away. This means you can use the profits that would have gone to taxes and put them back into your business.Let's say your business had a tremendous financial year, and you're considering upgrading your office equipment. Section 179 lets you do that and gives you a tax break for it.For example, imagine a business planning to replace its IT hardware over three years. But then, after a successful year and learning about Section 179, the company decided to use the tax break to replace everything in one go.In this scenario, what was a three-year project becomes a one-year mission. Sure, the business spends money on the equipment, but that money goes right back into the company instead of going to taxes.
As businesses navigate the year-end financial maze, Section 179 emerges as a resource for tax benefits and strategic investments. It offers significant tax deductions and empowers businesses to make timely and impactful investments in their operations.This can help speed up an upgrade's timeline. Instead of investing in small batches over the years, a business can make larger purchases a deduct the cost from its annual taxes.If you are considering purchasing new IT equipment, speak with your IT provider or internal IT department to see what equipment best suits your needs. You can also check out the Section 179 deduction calculator to see your estimated tax savings.Speak with your preferred financial consultant to see if the Section 179 deduction is right for your business.WEBIT Services specializes in IT strategy. In the past 25 years, it has helped hundreds of clients plan for IT purchases, updates, and installations.If you are currently in need of an IT provider, schedule a free 30-minute consultation with WEBIT Services to see if we can help.To learn more about IT strategies for businesses, we recommend the following articles:
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