Section 179 Update for 2015

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While the Section 179 tax deduction has been slashed to $25k (down from the previous four years’ $500k allowable limit) – it’s still good news if you’re looking to purchase software in 2015. But you better hurry. It’s a fairly educated guess to believe that Section 179 will continue to shrink or disappear in the near future. And please don’t be misled by the “off the shelf” disclaimer — both Sage 100 Contractor and Sage 300 Construction and Real Estate software qualify for the deduction.

How Section 179 works

From the Section179.org website:

Essentially, 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 (or 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 buy equipment and invest in themselves.

This well-written website continues explaining that the tax code is simple and straightforward. Just substitute “software” for “equipment” and the same rule applies:

When your business buys certain items of equipment, it typically gets to write them off a little at a time through depreciation. In other words, if your company spends $50,000 on a machine, it gets to write off (say) $10,000 a year for five years (these numbers are only meant to give you an example). Now, while it’s true that this is better than no write-off at all, most business owners would really prefer to write off the entire equipment purchase price for the year they buy it. In fact, if a business could write off the entire amount, they might add more equipment this year instead of waiting over the next few years. That’s the whole purpose behind Section 179 – to motivate the American economy (and your business) to move in a positive direction. For most small businesses, the entire cost can be written-off on the 2015 tax return (up to $25,000).

Year End Resources

Do you need help closing out Year End? LAI is offering onsite and online classes, or you can book a consultant by calling Carolyn Carter at 480-423-8300.