There are a little less than two months left before the end of the year. Many people will be happy to see 2020 in their rearview mirrors, but there is one last thing that businesses can do before the year is closed out.
This is typically the time that accountants are reminding business owners about year-end tax deductions. These purchases can result in a shorter payback due to being able to reduce tax burden when you file taxes in the early part of next year.
One perfect area to look at is your business technology infrastructure. When you upgrade hardware and software, you can often see the benefit almost immediately in improved productivity and expanded capability.
What Type of Tech Can I Deduct?
Section 179 of Form 4562 lays out several hardware and software deductions that companies can take. This year, the limit has been increased to $1,040,000 and there is a 100% bonus depreciation that’s in play as well.
Just about all parts of your IT infrastructure can be qualifying purchases for Section 179 write-offs. Here is an overview of what type of tech you can deduct:
- New or used computers
- Office equipment (like copiers, printers, etc.)
- Mobile phones and other similar technology
- Software that’s “off the shelf” (meaning it can’t be custom designed just for you)
- Security systems
- Network hardware equipment
To choose the best technology upgrades that pack the biggest punch, you’ll want to do a year-end technology assessment to identify your most critical needs and biggest opportunities.
Assessing Your Technology for the Smartest Purchases
Step 1: Review Your Workflow & Stuck Points
First, you’ll want to review the processes that you do every day at your office. This can involve everything from processing customer orders to handling HR requests from staff.
Look for any processes that are manual and taking longer than they need to. For example, do you have to key in online orders manually into your accounting system? If so, that can mean hours of additional work that could be eliminated with the right technology tools.
Step 2: Look for Any New Pandemic-Related Needs
Many companies have had their businesses impacted significantly by the pandemic. Not only in the way they handle facility safety but also in how they interact with customers.
Look for any potential new needs you have for pandemic safety, contactless customer support, or remote workers. These are all potential targets for year-end technology buys that can have a positive impact by filing a significant new need.
Step 3: Consider Replacement of Outdated/Unproductive Computers
Companies often keep computers in operation longer than they should, which can be costing them a lot more than the price of a replacement.
A study released by Microsoft found that companies that kept computers in operation over 4 years were paying more due to low productivity and other costs than the price of replacing that single old PC with 2+ newer models.
By replacing workstations that are older than 3-4 years, you can see an immediate boost in productivity, plus have the ability to deduct the cost of the new PCs from your taxes.
Step 4: Look at Your Cybersecurity Needs
Cybersecurity should be an ongoing priority for any business. Part of your year-end technology assessment should be a year-end IT security assessment.
It’s important to know and areas of vulnerability in your IT infrastructure so they can be addressed before they end up costing you dearly due to a ransomware attack or data breach.
Consider things like:
- Cloud access security
- Mobile security
- Updates to your firewall
- Remote worker network & device security
- Endpoint security
Step 5: Think of Future Technology Needs
If you can stay one step ahead of your competitors technologically, it can lead to higher revenue growth and faster adoption as new technology comes out. It’s better to be in front of the curve than behind it, and technology changes so fast, it’s vital to keep up if you want to stay competitive.
You’ll want to consider what’s on the horizon as well as what has recently come out that you may not have adopted yet. Technically advanced small businesses in Massachusetts and the rest of the country earn on average 2x the revenue per employee of those less advanced.
Some of the new technology purchases to consider for year-end tax deductions are:
- Wi-Fi 6 enabled router
- Mesh network
- 5G enabled devices
- AI-driven technology systems
- Structured data technology
Schedule a Year-End Technology Assessment with Pro Tech Guy
We can help your Framingham area business make the best year-end technology upgrades that can also benefit you when it comes to tax deductions. We’ll help you make the best and most cost-efficient decisions.
Contact us today to schedule your technology assessment. Call 508-364-8189 or reach us online.