Section 179 is an attractive tax deduction for businesses. An increasingly popular use of the Section 179 deduction is for software. When you buy software or equipment for business use, you can get tax deductions for buying and using them.
If you own a small business, the Section 179 deduction is one of the most essential tax codes you need to be familiar with. It lets you deduct all or part of the cost of equipment purchased or financed and put into place before December 31, 2023.
Section 179 Tax Deductions for 2023
This year, the Section 179 current deduction limit is $1,160,000 on qualifying equipment, and the limit on equipment purchases has increased to $2.89 million.
In addition, the bill allows businesses to depreciate 100 percent of the cost of eligible equipment bought or financed from January 1, 2023, through December 31, 2023.
How Much Can I Save on My Taxes This Year?
It depends on how much-qualifying equipment and software you purchase and put into use this year. To show you your expected tax savings, you can check this link to a Section 179 Calculator.
When Do I Have to Do This By?
Section 179 always expires at midnight, December 31st. So to take advantage of Section 179 this year, you must buy (or lease/finance) your equipment, and put it into use, by December 31st of this year.
To enable you to leverage an affordable payment option, you can also use a Lease Finance option.
How do I use Section 179?
To elect to take the Section 179 Deduction, simply fill out Part 1 of IRS form 4562, available for download at Section179.org.
Not all types of equipment qualify; therefore, you should consult your accountant or tax professional before making any purchases. If you do not feel comfortable completing the form yourself, your tax preparer can easily take care of form 4562 for you. Your tax preparer may also be able to advise you of additional Section 179 Deductions and Bonus Depreciation savings that may be available to you.
If you’d like to take advantage of Section 179 before the end of the year and purchase your software now, contact your Microsol Resources Account Executive or email us at info@microsolresources.com.
For companies in a cash-flow crunch, the biggest advantage to lease-financing is the ability to hold onto their cash. In most cases, a company can get the technology investments it needs with little or no down payment, allowing it to preserve working capital and lines of credit for other uses. Lease-financing of technology purchases offers many potential benefits over conventional loans or paying cash. By lease-financing, companies are able to break down large technology acquisitions into manageable, fixed monthly payments over 12, 24, or 36 months.
Here are some reasons why companies use leasing, and some comparison to loans or paying in cash.
Why lease financing?
Quick results. Lease financing allows you to have the latest software and/or equipment working for your business quickly and easily with fast approval, minimal documentation and prompt equipment delivery.
Low payments. Effectively maintain your cash flow with payments that are often lower than loan financing.
Flexibility. Structure payments and terms to fit your cash flow. For equipment purchases, varying end of lease options give you the choice to purchase the equipment, return it, or extend your agreement.
100% financing. Conserve lines of credit and acquire software, services and equipment without a major cash outlay. Unlike loans, which may require up to 20% down, leasie financing generally has minimal up-front costs. Finance up to 100% of the cost, with additional options possible to cover soft costs like installation and training.
Tax and accounting benefits. You may be able to lower your taxable income by deducting the lease payments. Lessees who prefer the tax benefits of ownership and use may take advantage of Section 179 depreciation.
Leasing vs. conventional loans
Leasing is fast and convenient. Conventional loans may require additional documentation and time beyond the one-page application and quick credit decision you get with leasing. This can delay your purchase of much needed equipment or technology.
Conventional loans can tie up lines of credit. Leasing preserves bank lines of credit, leaving them open for other business needs.
Conventional loans may require personal and business assets to guarantee the loan. With leasing, the equipment itself is
used as collateral, not your personal or business assets.
Leasing hedges against inflation. Receive the benefit of your equipment immediately, and lock into fixed payments at today’s
interest rate.
Leasing is flexible and doesn’t require a large down payment. Flexible payment terms and end of lease options mean you can choose the option that works best for your cash flow. With conventional loans, you will own the equipment and have limited payment term flexibility.
Leasing vs. paying cash
Pay cash for what appreciates, not for what depreciates. Investing the cash you would spend on the equipment could make a larger overall return than the interest paid on the agreement.
Protect your business against obsolescence. When paying cash, you may own equipment that soon becomes obsolete without having the flexibility to trade it in and upgrade to newer technology.
Pay for equipment as it generates revenue for your business. Let the equipment work for you right away, while you pay for it over time.
If you have any questions about the best option for you, contact your Microsol Resources Account Executive or email us at info@microsolresources.com.
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