Year-End Technology Purchases That You Can Use for Tax Write-Offs

2020 has been an unpredictable year for many companies. But one thing that has not changed is that businesses will be paying their annual taxes in the not too distant future.

One of the standard year-end activities accountants will often recommend is to make business equipment investments by December 31 that can be written off as tax deductions.

The overall limit on deductions for equipment and technology infrastructure has been raised for the 2020 tax year. Additionally, there is a 100% bonus depreciation that can be used to reduce the tax burden further.

If you are planning to make any hardware or software investments to improve productivity, support remote teams, or strengthen cybersecurity, now is the time!

Which Technology Purchases Can Be Deducted?

Business equipment and depreciation deductions are typically taken using Form 4562, and Section 179 provides deduction details. You’ll want to discuss how best to position your deductions with your accountant. When it comes to what technology will make the biggest impact on your business, your IT partner can help.

Section 179 allows deductions for 2020 up to $1,040,000 on equipment (new or used) and software.

There is a total spending cap on equipment purchases of $2,590,000 and a 100% bonus depreciation that can be taken on new and used equipment.

Here are some of the types of technology purchases that can be deducted:

Computers and other hardware (e.g., servers).
Office equipment (e.g., printers, VoIP desk phones, etc.).
Software (as long as it’s publicly available and not custom made).
Mobile phones.
Security systems.

Where are the best places to make technology upgrades for your business?

You want to look at both urgent needs and investments to drive growth for the future. Here are several areas to consider for year-end purchases.

Remote Worker Software/Hardware

The pandemic has changed how we work in a big way and caused many Iowa businesses to transition to a remote workforce. Even with businesses reopening, many still plan to keep remote work a permanent fixture in their office.

After the pandemic, 77% of businesses plan to increase the number of employees who work from home three more days per week.

Look at what you need to successfully support remote employees and help them be as productive as possible.

This may include things like:

Team collaboration software.
Laptops, so employees aren’t using personal devices for business data.
VoIP desk sets/headphones.
Remote security software (such as an endpoint device manager).

Cybersecurity Protections

Ransomware attacks are projected to increase sevenfold this year. The pandemic has caused phishing to skyrocket, and other cyber threats are also on the rise, such as credential theft.

Remote workers have expanded many networks this year beyond the office, which means network security also needs to be expanded to keep companies protected from breaches.

Now is the perfect time to have a security assessment completed to see where your cybersecurity infrastructure stands and identify any vulnerabilities. You can then make the necessary investments and use them for tax write-offs in a few short months.

Automation & Replacing Manual Processes

Are productivity dollars going down the drain at your business due to manual processes? When you have employees doing repetitive tasks by hand it can slow your company down.

Look at areas where you have manual processes that you can automate. These may look like:

Spreadsheets that are kept manually and emailed.
Input of the same data more than once in different business apps.
Paper processes that aren’t cloud based (like a visitor sign-in sheet).

The right software can help you automate to reduce manual processes, which will improve productivity and your team’s capability for forward motion in 2021.

Network Improvements

Your network is the heart of your operations. If you have unreliable Wi-Fi or a signal that won’t stay strong throughout your building, it slows down everyone.

Making the right network hardware purchases can improve security, speed, multi-device handling, and signal reliability.

Here are some potential network upgrades to consider:

Wi-Fi 6 router.
Mesh wireless network.
5G compatible devices.

Customer-Facing Systems

Look at ways to improve your customer experience and adjust to the new “no contact” way of doing things.

For example, you may want to look into contactless point of sale device options for retail outlets or look at ways you can make clients feel secure when visiting your location.

Look into adopting video conference tools and other cloud communication software that make customer service easier. Microsoft Teams is a robust tool that will help communicate and stay in touch with clients.

Get Help with a Year-End Technology and Security Assessment

Twin State Technical Services offers security vulnerability assessments. We can also take a look at your entire technology infrastructure and make meaningful suggestions for your year-end purchasing plans.

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Tags: cyber security, network improvements, software automation, tax planning, technology planning, technology purchases, year-end planning