There is less than a month left before 2021 is in the history books and we begin a new year. Many business owners are all too aware that tax season is right around the corner.
If you want to make any moves that will decrease your tax burden for this year, you don’t have much time left, as December 31st is the cut-off. One thing that you can do to positively impact your business taxes is to purchase new technology before the end of the year.
Section 179 of the tax code allows businesses to deduct certain depreciable business expenses. Companies can take a maximum deduction of up to $1,050,000 and a value of the property purchased up to $2,620,000 for 2021.
There also continues this year to be a 100% bonus depreciation deduction, which allows you to deduct the entire depreciation amount for a new purchase in the same tax year you expense the item.
This bonus means that you can recoup a bigger percentage of your technology upgrade cost in a few short months when you do your 2021 taxes.
Many types of technology categories fall under this deduction rule, including business phone technology, off-the-shelf software, and more.
Technology Deductions You Can Use
Following are the main technology categories that fall under the 179 deduction and ideas for upgrades you can make in each one to improve productivity, lower costs, and save time.
New or Refurbished Computers
If you have some computers that are getting older and more problematic, then replacing them before the end of the year can be a smart move. You can deduct the cost and 100% of the depreciation, plus you’ll be improving productivity by replacing an outdated system.
Generally, computers last approximately 1 year per $200 you spend. So, if you spent $800 on a business PC, then after 4-years, it should be replaced.
If you have any Windows 10 computers that do not have the required specifications to upgrade to Windows 11, they are also prime candidates for replacement.
You can deduct both brand new and refurbished (but new to you) devices.
Communication technology is also a category of equipment that can be deducted from your business taxes. So, if you are using a VoIP phone system, then you may want to consider equipment purchases like:
- Professional headsets for your employees
- VoIP-enabled desk phones
- VoIP conference room devices
Software that you purchase is also deductible, as long as it’s off-the-shelf, meaning it’s publicly available and not custom-made.
If you’ve been running an older version of Outlook on your server, then it might be a perfect time to upgrade so you can recoup some of the expense in a few short weeks or months, depending on when you file your taxes.
Cloud-based IP security cameras and keyless digital door locks are both popular security technologies. They reduce risk and make it easier for you to secure your building and keep an eye on things from your smartphone when you’re away.
Digital door locks remove the cost and hassle of having to keep up with physical keys or getting doors rekeyed when an employee leaves unexpectedly. Business owners also have a log of which people access which doors and at what time.
Office equipment is a general category that is also included in Section 179 business deductions. If you have a remote team, you can make purchases now that will improve their productivity by ensuring they have the office equipment they need to do their work effectively.
Some potential office equipment purchases you might consider to enable your remote team are:
- Ergonomic office chairs
- Wi-Fi 6 router (much better security than Wi-Fi 5)
- Filing cabinet
- Video camera
Video meetings have taken center stage due to the pandemic, but many companies are still suffering from frozen pictures and audio that weaves in and out during calls.
If you don’t have an optimized A/V set up for your meetings, it can make you look bad to potential customers, and also cost your team precious time because things have to be repeated due to spotty quality.
An investment in your audio-visual equipment is also tax-deductible. Beyond that, it ensures you have smooth meetings where the main points discussed can take center stage rather than problematic call reception.
Think about upgrading your microphone, webcam, sound, and other A/V components for better online meetings.
Get Help With Smart & Cost-Efficient Technology Upgrades
Two River Computer can help your Fair Haven business with smart year-end technology upgrades that provide value, plus reduce your tax burden this year.
Contact us today for a free consultation. Call 732-747-0020 or reach us online.