Laura Hills, Vice President of Marketing, Dydacomp
Tax season may be behind us, but making smart tax choices for your business is a year round consideration. If you have been considering adding or changing software to increase productivity and streamline the operations for your eCommerce business, you may find 2013 is the right time to do this. Although software cost is generally amortized (ratably deducted) over a 36 month period, if purchased or financed in 2013, software costing up to $500,000 may be able to be deducted against income this year.
President Obama signed the American Taxpayer Relief Act of 2012 (“ATRA”) into law in January of this year allowing business owners to deduct the cost of depreciating business assets on their tax returns, including software. Under ATRA, the §179 Deduction of $500,000 has been extended through 2013 as well as retroactively for 2012. The intent of the §179 Deduction is to provide tax relief for Small and Medium businesses (SMBs) and many businesses are taking advantage of this and reaping the savings.
The §179 Deduction offers SMBs a great opportunity to maximize their purchasing power by allowing for the deduction of the full purchase price of qualifying software from your gross income in 2013. Be sure that you take advantage of the §179 Deduction as it can change each year without notice and has even changed mid-year. In 2012 the §179 Deduction limit was dropped to $125,000 and was set to decrease to $25,000 in 2013. So if purchasing and implementing new software is in your plans, consider making 2013 the year to get this accomplished – your bottom line will benefit.
There are some general guidelines that the software must meet including:
- the software must be readily available for purchase by the general public;
- the software is subject to a non-exclusive license; and
- the software must not have been substantially modified (non-customized software).
A free online resource, Section179.org (www.section179.org) provides additional information and answers many common questions about the §179 Deduction for software.
The information above is information only and not advice, and should not be treated as such. We recommend that business owners consult with a tax professional for additional information on how to successfully take advantage of the §179 Deduction.