Are There Tax Incentives to Upgrading Our Software?

Q:
Our company is shopping for a new estimating system. We were told that we should buy before the end of the year to qualify for tax incentives. Is this true, and what exactly do I stand to gain?
  Larry

 
A:
If there was ever a perfect time to invest in your business’ hardware and software needs, now is the time.  For several years now, Section 179 of the federal income tax code has been offering small businesses a tax incentive to buy equipment and invest in themselves.  With the passage of the Economic Stimulus Act of 2008 and the American Recovery and Reinvestment Act of 2009, Section 179 was amended and extended to provide you with the following incentives:

• You can deduct the full purchase price of qualifying financed or leased equipment rather than depreciating expenditures over a number of years.  This gives you an immediate tax benefit for this year.  To qualify, the equipment must be purchased and placed into service before December 31, 2009.
• You can now deduct up to $250,000 (raised from the previous deduction limit of $125,000) for purchases of equipment, including computer hardware and software.

Section 179 offers a great opportunity to maximize your purchasing power. But there is no guarantee that it will be extended beyond 2009. Since recent legislation aimed at stimulating the economy provided a boost in terms of new and higher deduction limits, many CPAs are advising their clients to take advantage of this generous tax code while it’s available.

And my advice is the same. If you really are considering a new software purchase to help increase efficiency and boost productivity, this year might just be the best time to do it.

  Fred
 

Construction Business Owner, November 2009