Year-End IT Planning for Optimal Tax Advantages

By the DynaSis Team

With the end of 2014 quickly approaching, many small and medium-sized business owners (SMBs) maybe already looking ahead to 2015 projects. However, in early December there is still time to take advantage of SMB incentive programs that confer significant tax advantages.

One of these is the Section 179 deduction. Although it is a mere shadow of its former self (at the present), it is still valid, with a 2014 deduction limit of $25,000 and a purchase limit of $200,000. That amount might not cover the cost of a new warehouse or other large capital facility or equipment purchase, but in the IT world it will stretch a long way.

Basically, all businesses that purchase, finance and/or lease less than $200,000 of new or used business equipment in 2014 should qualify for the Section 179 deduction. Furthermore, most tangible goods, including “off-the-shelf” software, qualify for the deduction, as does the labor to install and configure any purchases.

For example, let’s assume a business with 50 employees has to date purchased $100,000 worth of miscellaneous, covered equipment. Its IT systems are outdated―especially its desktops, which are too old to run current generation software.

The firm could lease 50 $1,500 desktops at a value of $75,000, and then spend another $25,000, outright, on software plus labor for installation and configuration of everything. The entire $25,000 the company expended in cash would be deductible. Or, a firm could lease all the IT improvements, with the cost of software purchases, installation and configuration included in the lease amount, and still deduct $25,000.

There is also a possibility that Congress may still reinstate during 2014 the $500,000 limit for Section 179 deduction purchases that ended in 2013. If this happens, companies should have a plan for purchasing additional equipment and other qualified items they can put into service before year-end.

DynaSis’ virtual CIOs (VCIOs) are IT analysis and planning experts with a wealth of experience helping SMBs plan capital IT expenses that align with and support their short- and long-term business goals. Additionally, our Ascend platform lets a company lease its entire IT infrastructure for a low monthly fee, including full support (proactive monitoring and management and Help Desk) and IT upgrades as needed. To learn more or discuss having an IT assessment to create a baseline for selecting the most cost-effective, productivity-boosting improvements, please give us a call.