There are two great IRS tax breaks that are worth looking at before the end of the year. One, if you don’t act now will be GREATLY reduced after the end of the year.
Cash For Clunkers – IT Style
As part of the Americans With Disabilities Act of 1990, the IRS created a special tax credit to encourage companies to hire disabled people. The thinking around this was if you made your business more attractive to persons with disabilities, especially hearing, visual or physical disabilities, they will want to work for your organization. There was no requirement to have these folks working at your business already and the form is a very simple one-page form to fill out.
Under this program, you will receive a 50% tax credit for up to $10,000 in spending on equipment or other items that make it easier for the disabled person to work in your organization. Phone systems, certain computer systems and other IT equipment may qualify. Many phone systems have already qualified because many of the leading telephone systems come with hearing aid compatibility and integration with TTY and TDD devices for the deaf.
Section 179 Tax Deduction for Purchasing Business Equipment
Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. That means that if you buy/lease a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income. It’s an incentive created by the U.S. government to encourage businesses to purchase equipment and invest in building a healthy business community.
Essentially, it works like this; when your business invests in certain IT equipment, it typically is written off a little at a time through depreciation. In other words, if your business invests $50,000 on technology, it gets to write off approximately $10,000 per year for five years. Confirm these numbers with your CPA, these are just for example only.
Here is the timing part. Currently (IT equipment purchased between Jan 1, 2012 and Dec 31, 2012) you can write off up to $139,000. Starting next year, this is only $25,000. Act now! This puts the onus on you to carefully plan your purchases to get the most bang for your technology buck.
Can you use both programs?
Let’s look at what happens if you combine both of these programs, which you can do.
Your business invests in new qualifying equipment or a telephone system and let’s assumes your tax rate is 36%. The chart below is from the IRS website. We will also assume your business has 30 employees or fewer.
The tax credit is available only for businesses with gross revenues of $1 million or less, or fewer than 30 employees.
See what is eligible by visiting the Section 179 website.
You must follow IRS guidelines to receive these tax credits; the IRS checks to see that the credit is not abused. Don’t buy anything or do anything expecting to get the tax credit without checking first with your CPA or tax advisor.
Want to learn about qualifying equipment or speak with one of our IT professionals about your IT purchases? Give us a call today.
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