INFORMATION TECHNOLOGY: Now is the time to upgrade!
Posted on Tue, Aug 04, 2009 @ 09:10 AM
A new government tax incentive means now is the time to buy
While many have taken advantage of the Home Renovation Tax credit that Stephen Harper announced in January, not as many are aware that businesses will now be allowed a 100% Capital Cost Allowance for computers in the first year, and that this is a temporary two-year measure. These budget changes may have come from political necessity, but from it comes at least one business initiative of great value. This temporary measure allows business taxpayers to fully write off computer investments.
The change centres on the Capital Cost Allowance (CCA), the percentage of a capital asset's cost a business may deduct each year for tax purposes. Budget 2009 increases the CCA rate to 100 per cent for computer hardware and systems software acquired after January 27, 2009 and before February 1, 2011.
Prior to this announcement, businesses could only write off 55 per cent of a technology investment, at a rate of 50 per cent per year. In subsequent years, the write-off diminished as the remaining balance decreased. So the tax benefit, in the first year, was effectively 27.5 per cent of the total. If a company spent $10,000, it claimed $2,750 in the first year. The claim in the second year was based on the remaining balance of $7,250, and that amount diminished annually.
Budget 2009, therefore, will deliver a double benefit: first, it allows a company to write off an entire investment and, second, it can do so in the first year. While many companies are dealing with uncertain economic times, whether this becomes a tax credit or a deduction, now is the time to upgrade your hardware and software.
Eligible purchases include system software, computers and ancillary equipment such as monitors, printers and even keyboards. Not all office equipment is included, so consult a certified accountant before proceeding.
Act Now
If your company was thinking about buying new computers but had decided to hold off until after the recession, that is no longer a good decision. Business people should consider buying software and equipment now.
The timing of this announcement could not be better for many IT departments. With Microsoft already releasing new versions of Windows Server 2008, SQL Server 2008 and soon to release IN Q4 2009 or Q1 2009 are new versions of Exchange Server, SharePoint, Office, Visual Studio, SQL R2 and Dynamics.
With virtualization and Software as a Service (SaaS) changing the structure of many IT departments, now is the perfect time to take advantage of this opportunity. Many CFO's like to see great ROI (Return on Investment) and there has never been a better time to make the business case. Not only can you take advantage of the productivity increases that many of these products provide, but you can also write it all off this year.