By Nick Quaratiello

Blue Cow Software

If you are thinking of making an investment in new management software in 2020 you may now be able to “write off” the cost on your taxes.

Congress recently passed, and the President signed into law, the SECURE Act. SECURE is an acronym for “Setting Every Community Up for Retirement Enhancement,” and the main focus of the law is making retirement plans available for workers in small businesses. But the SECURE Act also includes a provision that extends several business tax credits and deductions that had either expired or were in danger of expiring at the end of last year.

One of the tax deductions that was extended is Section 179 of the IRS tax code, which allows businesses to deduct the full purchase price of qualifying equipment or software purchased or financed during the tax year. The extension includes a “reach back” for software purchases made in 2018 and 2019. That means that if you purchased qualifying software in the last two years, or buy software in 2020, you may be able deduct the full purchase price from your gross income.

The software must be “off-the-shelf” software, which means it must be available for purchase by any business or the general public, cannot be custom coded exclusively for your business, and must be used at least 50% of the time for business purposes. The software can be purchased or financed. It must be used for income-producing activity (no writing off video games!), have a determinable useful life, and be expected to last more than a year.

There are some limitations to Section 179. For software purchased in 2019, you can deduct up to $1,000,000 in with a spending cap of $2,500,000. You can’t deduct more than a business’s net taxable income. But you can carry over any costs that are not deducted into the following year and deducted them then.

Section 179 is a useful tool for business to use to offset investments that can help them grow and prosper – like Blue Cow Software’s Ignite® software suite, which generally qualifies for a Section 179 deduction. But it is important that you consult with a qualified tax advisor before making any purchase that you intend to deduct.

Need more information? Want to schedule a demo? Visit our website or call us at (888) 499-2583.