Have you wanted to make an investment in technology but not had the resources?
Well, now you can, thanks to a relatively new tax deduction that was signed into law last year. The Jobs and Growth Tax Relief Reconciliation Act of 2003 is stimulating technology sales and encouraging companies of all sizes to make considerable investments that they’ve wanted to make for years.
If you haven’t heard of this provision in the law, you’re not alone. Section 179 of the Jobs and Growth Tax Relief Reconciliation Act was specifically designed to give businesses the ability to increase their spending on new equipment and generate growth in order to stimulate the economy. The amount of investment that may be immediately deducted by small to medium-sized businesses increased dramatically, from $25,000 to a whopping $100,000.
This means that a company can purchase new technology and expense $100,000 from the total cost in the year it is purchased. Deductions can be taken on new technology, machinery, equipment, telecommunications infrastructure, transportation equipment and furniture. Additionally, the definition of property for Section 179 now includes off-the-shelf computer software.
The amount of investment qualifying for the immediate deduction begins to phase out for investments of between $400,000 to $500,000, and will be indexed for inflation in 2004 and 2005. Companies need to take advantage of it now because the deduction is only good through Dec. 31, 2005, and could change any time after that.
There are other benefits designed to encourage new spending. Section 179 also increased the first-year bonus depreciation deduction from 30 percent to 50 percent for investments acquired and placed in service after May 5, 2003, and before Jan. 1, 2005. This is a one-time deduction of 50 percent of the cost of the investment in the year of the purchase. There is no limit on this deduction.
Businesses are getting a tremendous push with these changes. The law is quadrupling expensing deductions and almost doubling first-year bonus depreciation. Companies that are aware of the deductions are scrambling to ensure they are taking the appropriate steps because it means hard dollars going directly to their bottom line. Surprisingly, many business owners have either never heard of the law or don’t know how to take advantage of it. Educating business owners on this powerful act is a slow process, but one that can truly benefit their companies.
There has never been a better time to make an investment in your business. For example, most organizations haven’t made any changes to their telecommunications systems during the last five or six years. Much has changed in technology over that time, such as the development of Voice over IP (VoIP), speech-enabled technology, call accounting and Web data conferencing. These are examples of new technology that could make your company the dominant player in your marketplace.
Consult with your tax adviser to see how the Jobs and Growth Tax Relief Reconciliation Act’s tax savings opportunities apply in your situation. Making a new investment will give you a competitive edge and increase your profitability.
Randy Wear ([email protected]) is president of Decision Systems Plus Inc., a member of the Technology Assurance Group (TAG). It provides voice, data,and convergence solutions that are based on integrated, open systems that work with a variety of organizational and technology environments and structures. Reach him at (847) 699-9960.
