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Business Resource Center - B2B Technology Articles
Tax Advantages May Help Push Businesses, Technology Forward
We are all well-aware of the efforts the government has been taking to spur along the economy, namely the recent Economic Stimulus Act of 2008 that put billions of dollars back into consumers’ pockets in an effort to drive spending. A less-known part of the act, however, is the government’s revision to Section 179 of the Internal Revenue Code which provides increased incentives for businesses in an effort to encourage their increased spending and pump dollars back into the economy. While the Section 179 allowance has been around since 1958 and permits businesses to accelerate the depreciation of qualified fixed asset purchases up to a certain dollar amount, in 2008 the government nearly doubled this allowance. This year, businesses can elect to expense up to $250,000 on qualified purchases as opposed to the originally projected $128,000. So what does this really mean for businesses and the local economy? It means now is the time to push our businesses forward…
Details of Section 179
Section 179 gives qualified businesses the ability to expand and purchase needed assets with more tax savings than in previous years. In short, Section 179 allows business owners to accelerate the depreciation of qualified purchases. This means instead of spreading out depreciation deductions over three to seven tax years, you are allowed to deduct the entire amount of large purchases (up to $250,000) in the 2008 tax year. So, for example, if your business was to purchase $200,000 in new network and computer equipment in 2008, instead of only being able to deduct $128,000 from for Section 179 plus the regular depreciation of $14,400, you are now able to claim the entire amount, saving you additional tax dollars in 2008. That is $57,600 more that can be used to help lower tax expenses this year!
Qualified property would include technology (computers, network equipment, copiers, and telephone systems), furniture/office equipment, company vehicles, and other equipment that is used in your business. Although Section 179 can be taken on vehicles, it is very limited.
How Section 179 Can be Used to Push Your Business Forward
Part of owning and managing an organization is making many decisions in the here and now. But it also involves looking down the road to future months and years and projecting future needs based on predicted growth. You need to consider how much staff is required - not only now but a year from now - to continue servicing your customers. You need to look at the technology and systems you are currently using and what you will need to use in the future as your business grows. You are always planning and trying to stay ahead of the curve.
So what if, for example, you know that in March of 2009, your servers will be at capacity, 10 of your computers will not be able to run the newest version of software needed, and your sales team will add on three new territories requiring additional mobile devices and equipment. You know you will have to make some new technology purchases in order to keep up. However, with the new increased allowances in Section 179, now may be the time to make these additional purchases in order to take advantage of the increased tax break. And, not only will you enjoy the advantage of lowering your taxes for 2008, the long-term affects could be profound on your business operations because you were able to move forward much quicker. Sales may increase because you can expand into new territories now instead of six months from now; staff may become more efficient with new computers and software, allowing increased billing or production levels; physical office space may be saved by upgrading servers and reducing some equipment. Furthermore, if technology purchases are more environmentally-friendly and energy-conscious, you can also save money on monthly utility bills. It all adds up to multiple ways of putting dollars back into your business’ pocket.
While technology purchases are, of course, only one area that you could look at in terms of electing to use Section 179, the important thing is analyzing your business now to determine your needs in the future. Talk with your accountant or financial expert to find out in more detail what purchases are eligible under this new tax allowance and start really thinking about what your business will need to keep growing in the coming years. If the capital is available now, you might be better off making the purchase in 2008. And, the original goal of the government still applies – increasing your spending within Bloomington-Normal and all of McLean County will also help speed along our local economies – something we can all benefit from.
Section 179 At-A-Glance
- Sole proprietorships, partnerships, LLCs, or corporations are eligible
- Property needs can be written off, up to $250,000
- Purchases can include technology, equipment, machinery, & furniture
- Perfect for those with current or upcoming needs
- Purchases must be made and placed in service in 2008
Talk with your accountant or financial expert for specific details.
Using Section 179 Also Has Green Benefits!
Although we may want to purchase more green-friendly products, it can often be much more expensive than traditional models. With Section 179, you might be able to at least consider ‘splurging’ on Green IT purchases that will not only qualify under Section 179 but also that can help you become a more eco-conscious company and save on utility bills. Examples of Green IT include purchasing “Virtualization” technology that can help convert 20 physical servers into three or purchasing low voltage CPUs or power supplies, both of which can mean big savings on energy bills! With Section 179, you may be able afford to purchase the higher-end, more efficient models!
If you would like more information about Business Intelligence, share your answers to these statements with Integrity and Harlan: hgeiser@integrityts.com or (309) 664-8116.
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