Have You Started Budgeting For 2022 Yet?

IT Budget 2022

Have You Started Budgeting For 2022 Yet?

Do you know what Section 179 has to say about your upcoming budgeting process? There are considerable opportunities to write off property taxes and save money in your next budget – but only if you know how Section 179 works.

What Is Section 179?

Let’s start with an overview of how Section 179 helps businesses, which comes down to two points:

  • It provides the opportunity to invest in the solution or solutions that your business needs
  • It reduces taxable income, freeing up finances to address other needs

As per the IRS Code, Section 179 allows, “A business to elect to recover all or part of the cost of certain qualifying property, up to a limit, but fully deducting it in the year you place the property in service”.

Put simply, in a normal business environment, when you purchase assets or property, you can deduct a depreciation of that over a number of years of the usable life of that purchase.

How Much Can You Deduct And What Qualifies?

The potential deduction generally comes down to the cost of the qualifying property, while still subject to a dollar limit and business income limit. In 2021, the total amount cannot be more than $1,050,000 (and you do not have to claim the full amount).

As to what property qualifies, eligible technology includes software and hardware (both specialized and generic), and even office furniture; however, all deductible items must meet the following requirements:

  • Must be eligible property: Including machinery and equipment, property contained in and attached to the building (refrigerators, office equipment, signs, etc.), gasoline storage tanks and pumps, livestock, off-the-shelf computer software, and qualified leasehold improvement property
  • Must be acquired for business use: This is property acquired for use in the specific trade or business that your company deals in, as opposed to property that is solely for the production of income (such as investment or rental property). Furthermore, property used for both business and non-business purposes is deductible if used more than 50% for business  —the deductible amount is the cost multiplied by the percentage of business use. (Note: if business use drops below 50%, you may have to recapture the deduction).
  • Must have been purchased: This omits any property acquired as a gift, or by one component member of a controlled group from another component member of the same group (e.g. sale of a product from one division of the business to another); or from a related person (family, spouse, ancestors, etc.).
  • Must not be described under What Property Does Not Qualify:
    • Land and land improvements
    • Property you lease to others
    • Property used to furnish lodgings
    • Property used primarily outside of the US
    • Leased property

Key Considerations For Your Budgeting Process

In order to incorporate the benefits offered by Section 179 into your budgeting process, keep the following in mind:

  • The property must be “placed into use” by 12/31/2021
  • Records must be kept to show specific identification of each piece of qualifying section 179 property, detailing how it was acquired and from whom, as well as when it was placed into service.
  • Increased section 179 deductions are available to enterprise zone businesses; for more information, see sections 1397A, 1397C and 1397D of the IRS code
  • The deduction also applies to leased or financed items

What Types Of IT Assets Qualify For Section 179?

By working with a trusted, informed partner like ExcalTech, your business can get the best technology, and know exactly which of it can be deducted from your 2021 taxes.

Deductible technology includes:

  • Servers
  • Printers
  • Switches
  • Backup and Disaster Recover Appliances
  • Wireless Access Points
  • Routers
  • Laptops
  • Scanners
  • Battery Backups
  • Storage
  • Workstations and Monitors

Don’t Forget About Bonus Depreciation

You can now elect out of bonus depreciation for a particular class of property (all or nothing) – for example, such as all 5-year property. Great news, right?

Well, maybe you’re still not enthusiastic about starting your budgeting process. Even with all this great information, and opportunities to save money in taxes, there’s still one main hurdle – you have to actually go through the budgeting process.

We get it – budgeting usually takes place at the end of the year. This is a busy time, both in business and in your home life, and so, budgeting in time to take advantage of key Section 179 benefits shouldn’t be quite such a tedious process.

Of course, all of this will depend on the qualifying hardware and software that you’ve purchased and will put to use prior to the December 31st, 2021 deadline. This is why you need to start thinking through your budget now, and not after you’ve finished your holiday shopping.

Need Expert Assistance With Your IT Budgeting?

If you want to take advantage of Section 179, the items must be purchased, shipped, and installed at your physical location by midnight on December 31st, meaning that not only do you have to place orders and have invoices prepared for your records, but the items in question need to be in use at your office.

Our team can assist — get in touch with ExcalTech to get started.

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