For many people, 2020 may have seemed like it has dragged on forever. But we are finally approaching the end of the year, which means business owners in Sturgeon Bay should be thinking about year-end upgrades that can be deducted from this year’s taxes.
Did you know that both hardware and software can qualify for tax write-offs? This means you have the perfect opportunity to invest in some important technology upgrades and see a monetary return in just a few months on your taxes.
It’s important to plan technology upgrades strategically, so you’re addressing the most important areas of your IT infrastructure. For example, you’ll want to look at areas like cybersecurity as well as how new software can make your office more productive.
To begin, you should review Section 179 of the U.S. Tax Code to understand what types of technology purchases can be deducted.
IT Purchases That You Can Deduct on 2020 Taxes
We’re going to focus on technology purchases in this article. You can review the IRS website to see other types of business deductions that qualify.
You should discuss the best way to position business tax deductions with your accountant. Here are the two that impact technology purchases made in 2020:
- You can write off purchased or financed qualifying technology up to $1,040,000
- You can use a 100% bonus depreciation deduction on qualifying equipment
Here are some of the technology items that can qualify.
You can deduct the cost of computers (desktops/laptops) that are either new or used. If they’re used, they have to be “new to you.”
Tangible Personal Property
This category includes cellular telephones and similar telecommunications equipment.
Off the Shelf Software
Software purchases are also deductible as long as you buy “off the shelf” software, meaning that it isn’t custom designed for your business and that it is available to everyone.
Real property includes items connected to a building, and security camera systems fall into this deduction category.
It’s important to know that business use deductions mean that the item has to be used at least 50% of the time for business.
When it comes to remote work from home situations for a business owner, the IRS notes, “…a portion of the taxpayer’s home is treated as a regular business establishment only if that portion meets the requirements for deducting expenses attributable to the business use of a home.”
What Year-End Upgrades Should I Consider?
It’s important to know how a tax deduction can help reduce the cost of technology purchases by returning some of that expense back in reduced tax liability.
Here’s a quick example:
The small business tax rate is 21% for a C-corporation. Say that you invest $25,000 in new business computers and software to keep your company competitive and productive.
The savings on your tax liability would effectively be $5,250 from deducting those purchases on your taxes.
Here are some of the technology upgrades you should consider making before the year comes to a close.
Remote Workforce Technology
Many companies are keeping a hybrid office and remote workforce permanently even after the pandemic for a number of reasons.
- Cost savings
- Business continuity
- Space savings
- Improved productivity
Look at any software that could improve your office/remote coordination and make it easier for employees working from home.
This could include things like a team communication platform (like Microsoft 365) and remote managedsoftware to keep offsite devices protected and provide support.
Cybersecurity is one of the most important areas of a business technology ecosystem. Just one breach or ransomware infection can be devastating to a small business.
46% of all small businesses have been targets of ransomware attacks. Of those businesses hit, 73% had to pay a ransom to get their systems back online.
It’s important to have a cybersecurity assessment done by an IT professional so you can see where you may have vulnerabilities and address those with the appropriate hardware and/or software purchases.
Business Continuity Purchases
Too many small businesses don’t have a good business continuity strategy. Or if they do, they have it only on paper and not fully implemented due to either time or budget restrictions.
Business continuity strategies protect you in the event of a crisis, natural disaster, or other unforeseen business-stopping events.
Some of the technology support you want to consider putting in place by the end of the year include:
- Firewall with advanced threat protection
- VoIP phone system
- Backup and recovery for all data (including data in cloud applications)
- Redundant systems, such as an additional off-site server for backups
Get Help for Your Smart Year-End Technology Upgrade Strategy
The experts at Quantum PC Services can help your Sturgeon Bay, Wisconsin business map out a smart strategy for year-end business upgrades that can pay you back in productivity, security, and efficiency.
Contact us today to learn more! Call 920-256-1214 or reach us online.