Apex Technology Management’s recent webinar, presented by Director of Sales and Marketing George Passidakis, offered a comprehensive look at Section 179 of the IRS tax deduction code. This deduction offers your business the opportunity to add the technology solutions your business needs while reducing your taxable income.
Instead of recovering the cost of technology purchases through annual depreciation deductions over the useful lifespan of the equipment, businesses can write off the full cost of purchases upfront. There is a limit of $500,000 available, and any purchases you would like to include in your 2016 Section 179 write off must fall under eligible property, must be acquired for business use, and must have been acquired by purchase (not inherited or rented).
There are several categories of eligible property, such as Tangible Property, which includes:
Off-the-shelf computer software can be included in your Section 179 deduction. This includes any software that is available for purchase by the general public, is subject to non-exclusive licensing, and has not been substantially modified.
Property acquired for business use must be for use in your trade or business. Property only acquired for the production of income such as investment property, rental property (if that is not your trade or business), and property that produces royalties does not qualify. Property purchased for both personal and business can be claimed as Partial Use, provided that the property is used more than 50% of the year for business during the year you place it into service. This Partial Use deduction can be extremely helpful for qualifying home businesses.
Any property your business claims must have been acquired by purchase. Property you’ve received as a gift or inheritance does not qualify. Property acquired from one member of a controlled group to another (from one division of your company to another), or acquired from a relative also does not qualify.
Vehicles can be included in your Section 179 deduction, but there are certain restrictions. You can only claim $25,000 of the total cost of an SUV or other vehicle intended for use on public roadways that is rated more than 6,000 lbs, but less than 14,000 lbs. Vehicles that seat more than 9 passengers, are equipped with a cargo area of at least 6 ft in length that is not readily accessible from the passenger compartment, has an integral enclosure separating the driver from the cargo area, have no rear seating, and do not have a body section that protrudes more than 30 inches ahead of the windshield are not subject to the $25,000 limit.
Finally, any property you intend to claim under the Section 179 deduction must be placed in use by December 31st, 2016. You must keep records that identify each piece of qualifying property, and these records must show how you acquired the property, who you acquired it from, and when it was placed in service. An increased section 179 deduction is available to businesses in an enterprise zone area (see sections 1397A, 1397C, and 1397D of the Internal Revenue Code).
There is still a little time left to take advantage of this deduction. Talk to your CPA or Tax Advisor about your options. If need be, Apex would be more than happy to speak with them for you to help answer any questions. This deduction offers a great advantage for your business, especially now that Section 179 has been made permanent. Make use of it each year to get as much benefit out of this opportunity as possible.