Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. That means that if you buy or lease a piece of qualifying equipment (including software or hardware), you can deduct up to $139,000 from your gross income for 2012.

All businesses that purchase, finance, and/or lease less than $560,000 in new or used business equipment during tax year 2012 should qualify for the Section 179 Deduction. If a business is unprofitable in 2012, and has no taxable income to use the deduction, that business can elect to use 50% Bonus Depreciation and carry-forward to a year when the business is profitable.

The 50% Bonus Depreciation can also be used by any business on new qualifying software and hardware purchases on the amount exceeding the $139,000 deduction limit up to the $560,000 limit.

To qualify, software must:

1.      Be financed or purchased outright by you.

2.      Be used in your business for income-producingactivity.

3.      Have a determinable useful life.

4.      Be expected to last more than one year.

5.      Be readily available for purchase by the general public.

6.      Must not have been substantially modified.

In other words, the software must be “off-the-shelf” and cannot be custom code, but some small customization is allowed.

What does all this mean for your business?  It means don’t put off buying the new software your business needs any longer. There is no guarantee these same tax benefits will be offered in 2013 so take advantage while they are available and upgrade now.

All the details of Section 179.

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