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Breaking Down Office Equipment Tax Deductions

February 26, 2015

Tax time is right around the corner, which can be an equally frustrating and downright heartbreaking experience for small business owners. Many small businesses can't afford to hire a top-notch CPA to identify tax breaks and navigate the various write-offs. However, there are plenty of ways to save on taxes if you know where to look. Once you identify those tax breaks, you can make strategic, business investments that will help your business grow and help you save on taxes.

One way to do this is investing in office equipment. Upgrading office equipment and software can greatly improve workflow and boost productivity. It is also allows businesses to deduct the full purchase price of qualifying equipment and/or software bought in 2014. In fact, the U.S. government crafted Section 179 of the IRS code to encourage small businesses to invest in themselves. In essence, businesses that take advantage of Section 179 end up paying less than the actual purchase price of the equipment.

Here is a breakdown of office equipment tax deductions:

• Section 179 (H.R. 5771) for 2014 provides a $500,000 deduction limit for new and/or used equipment and commercial off-the-shelf software (or software and services provided from a third-party vendor).
• There is a $2 million limit on equipment purchases before the above deduction begins to be reduced dollar-for-dollar.
• After the $2 million cap is reached, there is a 50% bonus depreciation taken. This bonus depreciation is only available for new equipment, while Section 179 applies to "new to you" equipment.

Certain rules apply, including a list of qualifying equipment. Also, companies must put the equipment or software into use between Jan. 1 and Dec. 31, 2014 to qualify for the tax break.

The more tax deductions you can take, the lower your taxable income will be. To maximize tax deductions, small business owners should study the IRS rules on what is deductible and decide how they can take advantage of those tax breaks to invest in their companies.

For more information about office equipment that can improve workflow, contact Pacific Office Automation today.

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