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Uncle Sam Can Help Buy Your New Business Phone System

Posted by Gregg Haughton on Nov 30, 2011 11:20:00 AM

2011 can be a great year financially, you can save money and get new equipment to improve productivity and enhance customer service!

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 Section 179 of the United States Internal Revenue Code (26 U.S.C. § 179), allows a taxpayer to elect to deduct the cost of certain types of property on their income taxes as an expense, rather than requiring the cost of the property to be capitalized and depreciated. This property is generally limited to tangible, depreciable, personal property which is acquired by purchase for use in the active conduct of a trade or business. You can expense up to $500,000 in 2011.
This deduction maximum is slated to be reduced to $125,000 at the end of 2011. Though Congress could elect to extend the higher allowance, don't count on it in the current political environment.

So how can this program allow you to save money on a business phone system? Let's look at the following expample:

  • You buy a new business phone system for $20,000
  • Let's assume you are in the 35% income tax bracket
  • You expense the entire system in 2011 according to section 179 rules
  • Your savings is 20,000 X .35 or $7000
Many businesses have cash flow constraints at year end that make a $20,000 outlay difficult. You can lease a business phone system to conserve cash and still take the deduction. This can be like Uncle Sam making the first 14 payments for you. Here's the example:
  • You Lease a $20,000 phone system over 60 months at $475 per month
  • You take the 179 deduction and save $7000 (35% rate)
  • The first 14 months are on Uncle Sam

By investing in a new phone system that will improve your team's productivity and enhance the service you provide for your customers, the 179 deduction will lower the cost.

Note: I am not an accountant and your situation may be different than the example. You should speak with your accountant to see if the 179 deduction works for your business.

Gregg Haughton

Topics: Business Phone System, VoIP Phone System, Tax Savings when buying a business phone system on

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