Get the IRS to Pay for Your Mac

By | December 8, 2007

OSX & Windows in One Box- A Web Developers Dream

Ever since apple began using Intel Chips, their computers have been an even hotter buy for programmers, graphic designers, and most web people (other than adult entertainment.) Being able to code or design using OSX and testing with parallels and windows puts everything you need for the web in one box.

So who needs a PC?

Problem – Apples are expensive:
With the MacPro (monitor not included; only 1GB of RAM) coming to a whopping $2500, you need to be making a mint in order to justify buying one.

Solution – Get a $900 rebate from the government:
Thanks to a wonderful provision in the US Tax Code called Section 179 any business (include S-Corps and LLCs) can write off the entire package and end up lowering the base price by about $900.00 to about $1,600. It brings down a well equipped $8,158.00 MacPro with Dual 30 inch Apple Cinema displays to a more manageable $5,302.70. Not bad.

No, this isn’t some wild, limit-stretching interpretation of an arcane tax rule. Section 179 is simply an ambitious attempt by the government to help the economy by encouraging small to medium sized businesses to make equipment purchases this year.

Here’s how Section 179 works:
When a business purchases equipment, they usually “depreciate” it over time on their taxes. Thus, a $1,000 computer purchased today would yield a small taxable income savings (say $200 per year) over five years. While this is nice, it doesn’t give a business any incentive to purchase a computer right now.

Section 179 does away with this depreciation, and instead allows a business to deduct the entire cost of that computer (the full $1,000) this year. It doesn’t take an accountant to see that this can have a considerable impact on the taxes owed for this year. In fact, since it’s likely a business will have to pay taxes anyway, making a large purchase of equipment this year can actually substantially lower the tax bill.

And this is the intent of the provision – to provide small businesses an incentive to buy or lease equipment right now (because it has to be purchased and put into use by 12/31/2007 to qualify for Section 179 status.)

The government figures that without the provision, businesses will only buy equipment normally (i.e. when they absolutely need it, and not one second sooner.) But with the Section 179 provision, perhaps many businesses will realize that updating the old computers this year makes sense (because they will need updating soon anyway.)

Business owners are smart, and they know that tax savings must be taken advantage of right now. Section 179 is viable right now – it may not be viable in a year or two (especially with 2008 being an election year – sometimes, business tax breaks are not seen kindly by the electorate.) So businesses are definitely encouraged to act now.

And act they should. All kinds of office equipment qualifies for section 179. Computers, Cell Phones, other electronic office equipment- whether updating a roomful of servers or just buying a few iPhones for the sales staff, the tax savings that Section 179 can provide is substantial. And yes, you can buy a few PC’s and a few Macs and put them to the test.

While the preceding is a good example of Section 179 and what it can do, like any tax code, there are some dollar limitations and “included item” categories that need to be adhered to. We suggest having an expert explain the full scope of Section 179 before making any purchases.

 

Don’t wait, act quickly!
Use of Section 179, which is made on Form 4562, is for the tax year the property was placed in service. Under Section 179, equipment purchases, up to the amount approved for a given year, can be deducted from taxable income – if installed by December 31st. Don’t let this tax advantage get away from you!

Want to know more?
To get answers to your questions or to learn more, contact your tax advisor or visit http://www.irs.gov/ and reference Form 4562.

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