Act Fast: Take Advantage of SECTION 179 Before the End of the Year.
This is important and something you should definitely consider. You can take an outright deduction equal to the full purchase price of a qualifying piece of equipment (such as IT solutions like hardware and off-the-shelf software, as well as other forms of office equipment). By doing this you can reduce your taxable income, and keep some of your hard-earned money.
One Source Imaging Solutions can help you take advantage of this benefit. Contact us right away because purchased items must be in place by December 31, 2017. Call us at 1-800-875-8843
Here’s What You Should Do:
- Be sure to keep track of all your business-related equipment purchases for 2017 – where you made the purchases, how they were acquired (They can be leased or bought out right.), and when they were placed in service. Remember, they must be purchased and set up on your site before the end of the year.
- Complete Form 4562 and attach it to your 2017 Tax Return. This is available on the IRS website or from your tax professional.
- You can deduct up to $510,000 for 2017 and reduce your taxable income. Amounts over $510,000 and up to $2,030,000 are eligible for reduced deductions.
Note: Your taxable income can’t be reduced below zero. If you’re operating at a loss, traditional depreciation write-offs will apply. Always consult your tax professional for details.
Here’s How Section 179 Reduces Your Taxable Income.
With the traditional Modified Accelerated Cost Recovery System (MACRS):
$100,000 Gross Revenue
-$20,000 Normal Depreciation
$80,000 Taxable Income
If you have a Gross Income of $100,000, and you buy out a $1 piece of equipment valued at $20,000, the MACRS method of depreciation only allows you to depreciate 20% in the first year ($100,000 x 20% = $20,000). The result is that you’re left with an $80,000 Taxable Income.
By taking advantage of the Section 179 Depreciation:
$100,000 Gross Revenue
-$100,000 Normal Depreciation
$0 Taxable Income
If you have a Gross Income of $100,000, and you buy out a $1 piece of equipment valued at $100,000, the 179 Deduction method lets you to depreciate the full amount in one year ($100,000).
Equipment You Can Depreciate Under Section 179 Includes:
- Networking Equipment/Switches
- Phone Systems
- Routers & Firewalls
- Computers and Workstations
- Laptops and Ultrabooks
- Wireless Internet
- Storage Devices
- Battery Backups
- Off-the-Shelf Software (not customized)
- Security Cameras
- Business Vehicles
- Office Furniture and Equipment
What Doesn’t Qualify for Depreciation Under SECTION 179?
- A Fair Market Value (FMV) Lease, (sometimes called a True Lease or an Operating Lease) doesn’t qualify for SECTION 179. It generally has lower monthly payments than a Capital Lease or a bank loan, and it’s most often used as a shorter-term lease, unlike a Capital Lease. FMV lease payments are 100% tax deductible as an operating expense but not a capital expense since the equipment is not seen as a purchase.
- Rental Agreements don’t qualify either because you’re not the owner of the equipment.
- Nor does used equipment, except in the case of vehicles.
Want to Purchase a Business Vehicle? Here are some details About Vehicles Eligible for the SECTION 179 Deduction:
Vehicles can be new or used (“new to you” is the key). The vehicle can be financed with certain loans or leases, or they can be purchased outright. Remember, you can only claim Section 179 in the tax year that the vehicle is “placed in service” – meaning when the vehicle is ready and available – even if you’re not using it. Plus, a vehicle that was first used for personal purposes doesn’t qualify in a later year if its purpose changes to business use.
As you can see, this can be a bit confusing. Always, talk to your tax professional about Business Vehicle Deductions and SECTION 179.
Keep These Points in Mind:
- Your items must be purchased or leased in the calendar year in which you are claiming the deduction.
- They must be placed into service in your facility in the same calendar year.
- Items that are partial-use must be used for the business greater than 50% of the time.
- Deductions should be based on the percentage of time used for business purposes.
- If the amount of time an item is used for business purposes changes, the deduction must be updated and reflect this.
- Additional deductions may be available for businesses in Special Deduction Zones / Empowerment Zones. Be sure to consult your tax professional if you are in one of these areas.
It’s Not Too Late: Section 179 is available to U.S. companies until the end of the calendar year.
For answers to any questions, or to find out more about how One Source Imaging Solutions can help your business take advantage of SECTION 179 as well as the latest technology, please reach out to our team.
Always consult your Tax Advisor to determine the best advantage for your business.