Take a Section 179 Software Tax Deduction in 2013

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Section 179 cloud software tax deduction 2013

A software tax deduction afforded by IRC Section 179 has been enhanced for 2013.

Remember Section 179 this year and get your new software tax deduction if you purchase additional applications before year’s end.  

This little enhancement of the IRC is a great tax advantage presently available for small business owners. Section 179 doesn’t increase the total amount you can deduct, but it provides for the entire depreciation deduction in one year, rather than a little at a time over the term of the asset’s in service life.

If you have been considering adding or changing software to increase productivity and streamline the operations for your business, you may find 2013 is the right time to do this.  Although software cost is generally amortized over a 36 month period, if purchased or financed  in 2013, software costing up to $500,000 may be deductible against income this year.

President Obama signed the American Taxpayer Relief Act of 2012 (“ATRA”) into law in January of this year allowing business owners to deduct the cost of depreciating business assets on their tax returns, including software.  Under ATRA, the Section 179 Deduction of up to $500,000 has been extended through 2013 as well as retroactively for 2012.   The intent of the Section 179 Deduction is to provide tax relief for Small and Medium businesses (SMBs) and many businesses are taking advantage of this and reaping the savings.

The Section 179 Software Tax Deduction offers SMBs a great opportunity to maximize their purchasing power by allowing for the deduction of the full purchase price of qualifying software from gross income this year. Be sure that you take advantage of the Software Tax Deduction now as it can change each year without notice and has even changed mid-year.   In 2012 the Section 179 Deduction limit was dropped to $125,000 and was set to decrease to $25,000 in 2013.  So if purchasing and implementing new software is in your plans, consider making 2013 the year to get this accomplished – your bottom line will benefit.

There are some general guidelines that the software must meet including:

  • The software must be readily available for purchase by the general public;
  • The software is subject to a non-exclusive license; 
  • The software has not been substantially modified (non-customized software).

Source: Laura Hills / Dydacomp

For more on Section 179 –

software tax deduction for 2013


Sarah Gardiner

All stories by: Sarah Gardiner