Now is the best time to buy your small business a gift - computer software or hardware. Why? Because you might be able to take it as a deduction. And who doesn't want to squeeze one more tax deduction in before December 31st?
We've got the small business tax advice you need on computer deductions from our accounting expert, Felecia Dixson.
Q. We at StartupNation.com wanted to ask you about an interesting factoid that we were reminded of lately: the tax deduction for computer-related purchases. Can you explain this to us, please?
A. For all new purchases of computer equipment, you can deduct up to $105,000 of the actual purchase price, under what’s called Section 179 of the IRS code, which has to do with equipment depreciation – as long as all of the equipment is purchased by December 31. This is for any business of any size.
Q. OK, but we also understand there are some catches.
A. Well, if you want to consider them that! Certainly one important qualifier for this deduction is that your company has to have net income for this tax year that is at least equal to the price of the computer stuff you buy – or, in other words, the size of your deduction is limited to the amount of your net income this year. If you only have $50,000 of net income for this year, for example, after all expenses and before Section 179 depreciation, you can take up to $50,000 in Section 179 expensing.
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