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.

For American Companies

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 QuoteWerks.

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 tax advisor.

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.