Section 179 – Windfalls for 2012 & 2013!

Did you know the Section 179 tax deduction has been increased to $500,000 for 2013? As an added bonus, the former limit for 2012 ($125,000) was boosted to a half million dollars as well. That means purchases made in 2012 can also qualify for the higher deduction.

Do software purchases qualify?

In short —yes! You can write off the full depreciation in a single year. There are a few basic stipulations for qualifying software (from website):

For basic eligibility, the software must meet all of the following general specifications:

  1. The software must be financed (only specific type leases or loans qualify), or purchased outright by you.
  2. The software must be used in your business for income-producing activity.
  3. The software must have a determinable useful life.
  4. The software must be expected to last more than one year.

In addition, these three specific stipulations must be met:

  1. The software must be readily available for purchase by the general public.
  2. The software must be subject to a non-exclusive license.
  3. The software must not have been substantially modified.

So, basically, you just can’t have custom code. The great news is that Sage 100 Contractor (MasterBuilder) and Sage 300 CRE (Timberline) are “right out of the box” — you’re entering your company’s data into software, not rewriting code!

Caveat:  Section 179 is not endless, nor consistent in amounts! warns, “2013 is the Year to Do It! Due to the extension of Section 179 under the ‘HIRE Act of 2010’ – the enhanced limits under the ‘Jobs Act of 2010’ – and the extension of the enhancements into 2013 via the ‘American Taxpayer Relief Act of 2012’ – you can basically write-off 100% of the equipment and software your business needs to buy or finance up to $139,000 this year!”

This deduction has a limited shelf life and the $500k ends in 2013; the deduction for 2014 is scheduled to be REDUCED TO $25,000. It may disappear or expire completely!

Want more info on Section 179 and purchasing software? Give Tony Merry a call at 480.423.8300 and get on board the Deduction Train to Moneytown!