When the close of
the fiscal year draws near, many business owners begin to look for
ways to deduct business income for tax purposes. Particularly, small
business owners that do their own taxes may be scrambling to find a
way to reduce their looming tax bill. The following tax deduction
vehicles offered by the US and Canadian governments allow business
owners to reduce their tax bill through a Section 179 deduction in
the United States or a Capital Cost Allowance (CCA) in Canada.
These options can increase business tax deductions.
Please note that the following information is not intended as a
substitute for professional tax advice. You should always consult
with a tax accountant before making any purchasing decision that
carries with it tax implications. Consult your tax advisor for the
applicability of these deductions for your business.
What is Section 179?
Section 179 refers to a part of the Internal Revenue Code
which allows businesses to deduct items that would normally be
depreciated over several years to be treated as expenses. This
means that the business can deduct the full cost of the item
that year, rather than only a small portion of it with the rest
being depreciated over the following years. The section 179
deduction is intended for small businesses so many of the rules
regarding this deduction revolve around keeping it useful for
small businesses only.
How do Section 179 Deductions Work?
Only certain items are eligible for section 179 deductions.
Most equipment, vehicles, computers, and furniture are eligible
for a section 179 deduction, including QuoteWerks and other
sales automation software applications. Business owners should
also be aware that while the section 179 deduction gives a
larger deduction for the year it is used, that depreciation
cannot be used in following years.
According to the IRS, the
maximum amount that any small business could deduct using a
section 179 deduction is $250,000 in 2009 and all qualifying
software applications and other equipment must have been put
into service the same year the business wants to use a section
179 deduction for it. Additional restrictions may apply. Please
consult the IRS website for more information or contact your
US tax advisor.
For Canadian Companies
What is the Capital Cost Allowance (CCA)?
In an effort to boost the economy, the Canadian Federal
Government has accelerated the CCA (Capital Cost Allowance) on
computer equipment and related software (anything covered by
class 50, schedule 2). This includes sales automation software
which would apply to CRM and sales quoting solutions such as
How does the CCA Work?
The Canadian Federal Budget for 2009 was passed with
supplemental legislation providing for a temporary 100% CCA
write-off for eligible computers and software acquired after
January 27, 2009 and before February 2011. This 100% CCA rate
will not be subject to the half-year rule, which generally
allows half the CCA write-off otherwise available in the year
the asset is first available for use by the taxpayer. As a
result of this measure, a business will be able to fully deduct
the cost of an eligible computer and related software in the
first year that CCA deductions are available.
According to the Canadian Revenue Agency, additional
restrictions may apply. Please consult the
CRA website for more information or contact your Canadian
Even if a small business is not able to deduct all of their
depreciable goods using either of these deduction offerings, they
will still be able to depreciate those goods in the normal fashion.
However, these options give a great alternative for small business
owners seeking to maximize their tax deductions. Given that both
governments require QuoteWerks to be placed in service during the
same fiscal year as the deduction is claimed, now is the best time
to purchase QuoteWerks.