As a business owner, you probably have an accountant who helps you manage your fianances, payroll, and taxes each year. If you've hired out these responsibilities to a professional, you might not be aware of some of the little things that can save your optometric practice some series cash. Today we want to share with you some details on what you should know about the Section 179 Tax Deduction.
Before we move forward, this article is really only to help you gain a general understanding of the rule and how you might be able to use it to your advantage. We aren't tax professionals, so we encourage you to talk to your accountant or tax consultant before moving forward.
Can Your Practice Take Advantage of the Section 179 Tax Deduction?
What is the Section 179 Deduction?
Section 179 of the IRS Tax Code allows a business to deduct the full purchase price of financed or leased equipment and off-the-shelf software that qualifies for the deduction. The equipment purchased, financed, or leased must be within the specified dollar limits of Section 179, and must be placed into service in the same tax year that the deduction is being taken.
What is the deduction limit for 2016?
In 2016 the deduction limit is $500,000. This deduction works on new and used equipment as well as off-the-shelf software. The limit is only good for 2016, and the purchase must be made and put into service by the end of the day on 12/31/16.
For more details on the deduction limit and spending caps, visit section179.org.
What types of equipment and software qualifies?
You can deduct the cost of tangible property that you buy for your business that the IRS has determined will last more than a year. Examples include things like computers, business equipment, machinery, computer software, and office furniture.
A few things you can't deduct include land, permanent structures, inventory, patents, and ac/heating units.
What software qualifies?
Off-the-shelf computer software is not custom designed, and is available to the general public. Some general specifications are:
- Software must be financed or purchased outright by you
- Software must be used in your business for income-producing activities
- Software must have determinable useful life
- Software must be expected to last more than one year
So what software doesn't apply? Basically, the software can't be custom made (custom coded) specifically for you. It should be available for purchase by the general public, subject to a nonexclusive license, and has not been substantially modified.