How to Save Money on Your IT Investments

Now is the time that business owners and financial executives meet with their CPAs to evaluate their company’s tax position and plan next year’s budget.

Typically, information technology is one of the largest annual investments a business makes. At a time when cost reduction is the number one priority among businesses, here are a couple tax deductions and special offerings that will help companies find extra cost savings this year.

Save Money Through Tax Deductions

In 2010 the federal government updated the Section 179 Deduction, a tax credit that allows businesses to accelerate their deductions for depreciation. Under Section 179, businesses can fully write off their acquisitions made during that tax year.

Businesses can buy or lease up to $500,000 in machinery, computers, software, office furniture, vehicles, or other tangible goods, and depreciate it at one time. Normal depreciation requires a business to depreciate assets over a period of time, but with Section 179 you can take the full deduction in the same year it was purchased. For small businesses this deduction is especially useful because it helps them improve cash flow and lower their tax burden.

In 2010, the government established Bonus Depreciation, a tax deduction that allows businesses to claim 100 percent of all operational equipment and software needed that year after the $500,000 deduction is reached. This deduction has fewer limits than Section 179 and can also be taken by businesses with a net loss in 2011. When electing these deductions, Section 179 is generally taken first, followed by Bonus Depreciation. Consult your CPA to figure out which is the best option for that tax year.

Special Offers Through Vendors

This year, Microsoft and other IT brands are offering businesses special discounts if they update their IT infrastructure and licensing before December 31, 2011.

Microsoft recently introduced “The Big Easy Offer 7,” a limited-time offer where every qualifying product you purchase before the end of the year will earn you partner subsidy funds for additional purchases of hardware, software or services of your choice. All you have to do is purchase or upgrade your Microsoft products through a Microsoft partner and the company will send you a check to help pay for installation or future services.

Other manufacturers are also offering incredible rebates and discounts on 2011 equipment as a way of selling surplus stock and improving annual sales so check with your IT consultant to see what promotions you qualify for.

If you plan to update your IT network, do it now and double dip on your savings. You will not only get a better deal on software and equipment, but also be able to claim additional tax deductions.

These two opportunities are the best way to save money on your IT purchases for 2012, but you must act now before these offers go away. Sit down with your IT consultant or Chief Information Officer to discuss what type of upgrades, licensing and support you will need, and how these opportunities can apply to you.

As featured in the November 27th issue of The Press Enterprise.