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HOW RECENT TAX REFORM ALLOWS CLIENTS TO WRITE OFF 100% OF CAPEX



Many smaller organizations struggle with older technology that needs to be refreshed. The digital economy has rendered legacy infrastructure less effective and more expensive to own. Provisioning traditional infrastructure has become so complex and tedious, it actually hinders an organization’s competitiveness to pivot to rapidly changing market conditions. Due to the speed of business, IT needs to be more agile and proactive in supporting strategic business initiatives. IT operations needs to spend less time on maintaining older equipment and more time enabling future technologies and applications.

While it is generally accepted that technology can drive and enable an organization’s ability to rapidly capitalize on new opportunities and increase engagement with prospects and customers, it’s no secret that the bottom line of the business comes first and it can be expensive to implement new technology for a long-term gain. Many smaller companies forgo investments in technology for business reasons—for example, they can’t make the capital outlay.

However, with the proper tax incentives, capital expenditure on IT infrastructure can become more affordable and justifiable. Recent changes in the Federal Tax code—specifically Section 179—provides great benefits to small businesses.

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.

Specifically, the tax code was just updated for 2018[1]:

  • Section 179 depreciation is now $1,000,000—This deduction is good on new and used equipment, as well as off-the-shelf software. To take the deduction for tax year 2018, the equipment must be financed or purchased and put into service between January 1, 2018, and the end of the day on December 31, 2018.

  • Bonus depreciation is now 100 percent—This is the maximum amount that can be spent on equipment before the Section 179 Deduction available to your company begins to be reduced on a dollar for dollar basis. This spending cap makes Section 179 a true “small business tax incentive” (because larger businesses that spend more than $3.5 million on equipment won’t get the deduction.)

  • Equipment purchase limits have been increased to $2.5 million—Bonus Depreciation is generally taken after the Section 179 Spending Cap is reached. The Bonus Depreciation is available for both new and used equipment.

More Than Just a Technology Provider

Here at American Digital, we are constantly scanning the horizon to ensure we are staying on top of industry-related trends—whether it is technology, business, or tax related. We understand that as a business, the bottom line is important. The trick is finding a balancing point where you can invest in modern technology—either through capital investment, or by leasing, to meet both your business objectives and your bottom line. We not only offer technology solutions and professional services, but we also like to keep our customers informed on changes in tax laws that may positively impact their bottom line.

Interested in learning more? Give us a call: 847-637-4300.

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