As businesses approach the end of the year, many are looking for ways to reduce their taxable income and increase cash flow for the coming year. One powerful way to achieve this is by taking advantage of the Section 179 tax deduction, a provision that allows businesses to deduct the full purchase price of qualifying equipment, machinery, and technology purchased or financed in the current tax year. However, with so many options for technology products on the market, making the right procurement decisions can be overwhelming. This is where procurement consulting can make a significant impact.
In this blog post, we’ll explore how procurement consulting can help your organization fully leverage Section 179 tax deductions and optimize your technology investments.
What is the Section 179 Tax Deduction?
Before diving into how procurement consulting can help, it’s essential to understand what the Section 179 tax deduction is and how it works. Section 179 of the IRS tax code allows businesses to deduct the cost of qualifying assets, such as equipment, technology, machinery, and software, in the year the purchase is made, rather than depreciating the cost over several years.
For the 2023 tax year, organizations can deduct up to $1.22 million in qualifying equipment purchases, with a phase-out threshold of $3.05 million. Once a business purchases more than that amount, the Section 179 deduction begins to decrease. The provision also includes Bonus Depreciation, which allows organizations to take an additional deduction for equipment purchases above the Section 179 limit. It’s important to note that Bonus Depreciation is set to phase out gradually, making now the perfect time to invest.
Why Organizations Should Leverage Procurement Consulting
While Section 179 can offer significant savings, maximizing the benefits of your new technology requires careful planning and strategy. This is where procurement consulting can help. Procurement consultants specialize in guiding organizations through the purchasing process, ensuring they make informed decisions that align with both business challenges and financial goals. Here’s how procurement consulting can help businesses fully capitalize on the Section 179 tax deduction:
- Identifying Qualifying Purchases
Not all purchases are eligible for the Section 179 deduction. It’s essential to ensure that the technology, equipment, or machinery you’re purchasing meets the IRS requirements. Procurement consultants are experts at identifying qualifying assets and ensuring that your business invests in the right products to maximize tax deductions.
A procurement consultant will work with you to evaluate your organization’s needs, then recommend purchases that not only improve your operations but also fall under the Section 179 deduction criteria. For example, while most tangible equipment like computers, printers, and office furniture qualifies, certain software purchases and leases may also be deductible. By leveraging the expertise of a procurement consultant, you can avoid making costly mistakes that could disqualify your purchases from Section 179 eligibility.
- Strategic Planning for Large-Scale Purchases
For many organizations, making large equipment purchases at once can be a significant financial decision. However, the Section 179 deduction can make these purchases more financially feasible. A procurement consultant can assist in prioritizing which assets to purchase based on your company’s immediate and long-term needs. By aligning purchases with your business goals and the Section 179 deduction, you can avoid the pitfalls of over-purchasing or under-utilizing equipment, ensuring that every dollar spent on new technology or equipment helps your business grow.
- Maximizing Cash Flow with Financing Options
One of the unique benefits of Section 179 is that the tax deduction applies not only to outright purchases but also to financed equipment. This means that your business can still take advantage of the full deduction even if you don’t pay for the equipment upfront. Procurement consultants often work with financial institutions and leasing companies to find financing solutions that fit your business’s needs, allowing your organization to maintain cash flow while taking advantage of Section 179.
- Leveraging Bulk Purchases and Vendor Relationships
Procurement consultants often have established relationships with equipment vendors, manufacturers, and distributors, which can help businesses secure better pricing and financing terms. Additionally, procurement consultants can help you make bulk purchases that further increase your tax savings.
By buying larger quantities of qualifying equipment, your business can take advantage of economies of scale, negotiate favorable terms, and ensure that your Section 179 deductions are applied across multiple purchases. This can be particularly helpful for businesses looking to upgrade multiple pieces of equipment or technology within the same fiscal year.
Conclusion: Unlock the Full Potential of Section 179 with Procurement Consulting
With the Section 179 tax deduction offering significant financial savings, organizations should act strategically to leverage this benefit before the end of the year. Procurement consulting can play a pivotal role in helping your business navigate the complexities of this tax incentive, identify qualifying purchases, and maximize your deductions. By partnering with procurement experts, you can ensure that your technology investments align with your long-term business goals while providing substantial tax relief.
As the year draws to a close, now is the time to take action. If you’re looking for a procurement consulting partner to strategically plan your technology purchases and make the most of Section 179 before the opportunity expires, reach out to All Covered today! We’re here to help.
