Section 179 Tax Deduction for Atlanta Businesses

As we approach the end of 2021, Atlanta businesses continue to adjust their operations to address the many changes brought on by the COVID-19 pandemic. If your business is experiencing increased customer demand, you have probably discovered that you are in need of additional equipment and software to process more orders through your distribution centers, warehouses, or other facilities.

Section 179 enables your business to save money by allowing you to deduct the full price of new and used equipment from your taxable profits that qualify under the tax code.

Every Atlanta business needs PCs, mobile devices, servers, software, printers, data security hardware, and more. Fortunately, Section 179 of the IRS tax code lets businesses better manage their IT budgets. Atlanta businesses can write off the entire cost of hardware and off-the-shelf software purchased and put in use before December 31, 2021.

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What Is the Section 179 Tax Deduction?

Many business leaders think the Section 179 deduction is one of those complicated tax codes. It really isn’t.

Section 179 allows businesses to take an immediate deduction for qualifying equipment and off-the-shelf software purchased or financed during the current tax year. When you buy or lease qualifying equipment and software, your business can deduct the entire price from your gross income. Section 179 is a tax incentive that encourages businesses to invest in themselves.

Section 179 Deduction Limits for 2021

The Section 179 deduction limit for 2021 is $1,050,000. Atlanta businesses can deduct the full cost of qualifying equipment (both new and used) and software, up to $1,050,000, from your 2021 taxable income. This deduction is good until you reach $2,620,000 in purchases for the year.

Section 179 helps businesses of all sizes reinvest in themselves. The full $1,050,000 deduction can be claimed up to the $2,620,000 monetary limit. Once your business has reached this monetary limit, the Section 179 deduction depreciates dollar-for-dollar. Once qualifying business purchases total more than $3,670,000, your business will not be eligible for the deduction.

What Business Equipment and Software Qualify under Section 179?

According to Section 179, almost all types of business equipment that your business purchases or finances will qualify for the Section 179 deduction. Examples include office equipment, office furniture, computers, software, phone systems, security systems, and more.

The following requirements must be met for your businesses and equipment purchases to be eligible for the Section 179 tax deduction:

  • Equipment must be bought, financed, or leased between January 1, 2021 and December 31, 2021.
  • The equipment has to be put into use by December 31.
  • Equipment must be used more than 50 percent of the time.
  • Your business must purchase less than $2,620,000  in qualified property to maximize your deduction.
  • Qualified purchases must be used for business purposes.
  • Your business must have a taxable profit.

To qualify for the Section 179 deduction, software must also be purchased or financed with a specific qualifying lease or loan. Your software must also be used to conduct business purposes, have a software life that extends beyond one year, be readily available for purchase by the general public, and be subject to a non-exclusive license and not substantially modified.

Are we trying to make you go out and purchase new or used equipment and/or software? No. Teamspring only recommends that Atlanta businesses acquire equipment and software when it meets their business needs. Section 179 just happens to be a motivating factor for businesses to make purchases a little earlier than planned.

We would love to help your business take advantage of Section 179, but we are by no means tax experts. We do encourage you to consult with your financial advisors and tax preparers to give you a better understanding of what is deductible and what is not deductible. Your financial advisors and tax preparers can also help you determine whether it makes sense for you to make purchases of equipment and software that qualify under Section 179.

Do you want to reduce your tax burden and upgrade your technology environment at the same time? Contact Teamspring today.