Now's the Time to Plan Computer & Software Purchases for 2020 Tax Write-offs
I.T. consultant that can make a significant difference in the overall price you’ll pay for new computers and software when deductions are factored in.
Technology Tax Deduction Limit Increase This year, the limit has been raised on Section 179 deductions, which benefits small businesses in Denton and Wise counties, and the rest of the country. Businesses can deduct 100% of the price to purchase or finance new or used computers, office equipment, and software up to a total of $1,040,000. There is also a bonus 100% depreciation deduction that can be used for new and used equipment. So, instead of having to spread a depreciation tax write-off out over several years, you can deduct the entire depreciation for qualifying hardware bought in 2020. The spending cap on equipment purchases is $2,590,000. To qualify, software has to be “off the shelf,” meaning that it can’t be custom built only for your company. It has to be publicly available.
Types of Technology Purchases You Can Deduct from 2020 Taxes Technology deductions include items such as:
Computers (desktops, laptops)
Cellular phones and technology
Office equipment (printers, etc.)
Surveillance systems (IP security cameras, etc.) To take a business tax deduction on technology purchases, the items have to be used for business at least 50% of the time. You can read more on the IRS site in the instructions for Form 4562.
Which Technology Upgrades Should I Make by Year-End? To take advantage of 2020 technology tax deductions, you’ll want to upgrade areas of your I.T. before the end of December. Here are several areas to consider and which can have a positive impact on cybersecurity and productivity.
I.T. Security Upgrades According to a study by McKinsey, cybersecurity is going to be a hot spot for business spending in 2021. Both large enterprises and small businesses are expecting to increase their spending in three key areas:
Identity and access management You can get a jump-start and see a benefit back on your 2020 taxes if you upgrade your cybersecurity infrastructure before the end of the year. Look for improvements such as firewalls with advanced threat protection, a cloud access security broker (CASB) application, and endpoint device management software.
Upgrades to Facilitate Remote Teams The pandemic has completely changed the way that businesses view work-from-home employees. Working remotely has gone from a “perk” to a necessity, and 74% of companies intend to keep some employees remote permanently. Do a survey of your remote team and ask if there are any needs that they have that would make them more productive and facilitate the office to remote connection. Look at technologies like:
Team collaboration software (like Microsoft Teams)
Business VPNs for security
All-in-one cloud platforms
Device Replacements for Productivity Do you have desktops or laptops that are older than 4-years old being used by your employees? If so, you’ll want to look at replacing those to reduce productivity losses and the risk of data loss. Once PCs get past the four-year mark, they begin to cost companies more than it would cost to replace them. Here are some computer replacement statistics comparing computers older than 4-years old to those that are less than 3-years old:
Data loss is 3x higher for a PC older than 4 years
PCs older than 4 years are breached 3x as much
Downtime is 2x more for a 4+ year old computer Replacing those older computers now before the end of the year, not only makes your team more productive in 2021, you’ll also be able to write off those purchases in a few short months.
Prepare for the Office of the Future New technologies like Wi-Fi 6 and 5G are going to change the way we work in the very near future. IoT devices and automation are also big game-changers that will increase productivity and eliminate manual processes. Look for any upgrades you can make this year that will prepare your office for the next year and then some, so you’ll be ahead of the game instead of trying to play catch-up. Consider technology purchases such as:
5G enabled laptops or mobile devices
Wi-Fi 6 routers
IoT sensors & technology