Ensuring business success often comes down to having great timing. Office managers and executives who know how to properly time their actions will consistently make decisions that seem like strategic masterstrokes.
This is true when launching new products, it is true when hiring new employees, and it is especially true when investing in new office equipment. Office managers who time their office equipment purchases correctly can deploy the best copiers, printers, and multifunction devices while paying the lowest prices for the privilege.
Not only that, but timing tax deductions and write-offs for imaging equipment can significantly improve cash flow within the business. When it comes to purchasing equipment, great timing is a strategic masterstroke.
When to Purchase Office Equipment to Maximize Tax Benefits
For most businesses, the best time of year to buy office equipment is in December, right before the new year begins. This is due to a variety of factors, but the most important one is the relationship between tax liability, income, and expenses.
As the end of the year comes along, many departments and offices find themselves with unused budget to spend and an incentive to put remaining funds to good use. In situations where annual budgets don’t simply roll over into the next year, there is no reason not to use budgets to improve office performance coming into the next year.
At the same time, expenses logged earlier in the year can reduce the tax liability of the entire company for that year. This can be helpful when tax accountants are looking for opportunities to deduct capital investments and reduce the business’s overall tax liabilities.
While budgets do not usually carry over from year to year, losses and capital expenditures can. Executives who expect to post a profit in the earlier year may choose to purchase equipment during that year and encourage customers to pay in the next year, and then write off depreciation for that equipment for multiple years.
Alternately, following the change in US tax law in 2018, businesses can now write-off the entire value of purchased equipment using the revamped Section 179 tax deduction. While this deduction previously established a five-year period for deducting capital expenditures, it now allows businesses to claim up to $1 million in claims for a single year.
This is why equipment manufacturers often offer end-of-the-year deals designed to entice customers to purchase office equipment during the final month of the year. They know the window to capitalize on tax benefits is short, and they seek to capitalize on it – which incidentally provides better deals for office managers as well.
Write Off Obsolete Equipment to Finance New Equipment Purchases
Another valuable way businesses can optimize their purchase strategy is by using tax deductions for damaged and obsolete equipment to their advantage. Obsolete equipment usually offers more valuable deductions than damaged equipment does.
For example, consider the replacement of an old multifunction printer. If the printer doesn’t work the way it used to, then it is possible to write off a portion of its value when purchasing a new printer. But if the printer is obsolete, then the entire value of the printer is tax-deductible.
Executives with great timing can pay the deductible expense of discarding the obsolete equipment and the capital expense of purchasing new equipment to offset revenues. If done correctly, this can take a significant part of the new multifunction device’s cost out of the equation.
When doing this, it’s important to classify the equipment correctly according to its useful life. The Internal Revenue Service (IRS) classifies capital assets into nine separate categories:
- Three-year property
- Five-year property
- Seven-year property
- 10-year property
- 15-year property
- 20-year property
- 27.5-year property
- 39-year property
Most printers, copiers, and multifunction devices fit into the five-year category. Any electronic equipment that is more than five years old and hasn’t already been subjected to a depreciation claim may be eligible for a tax deduction of its full value as an obsolete item.
Additionally, businesses that make Section 179 claims on equipment are not eligible to make further deductions after the fact. Consult a professional tax advisor to identify the best choice between these opportunities to reduce tax liability.
Have Kelley Imaging Help You Procure New Office Equipment
Whether you are looking for end-of-the-year bargains or planning to use your remaining annual budget to improve next year’s office processes, Kelley Imaging can help you make optimal use of those funds. By making investments at the right time, you can improve office infrastructure in a way that offsets most of the cost while maximizing the benefits to workplace efficiency.Capitalize on end-of-the-year savings and upgrade your office’s infrastructure with our help. Talk to a Kelley Imaging office equipment specialist to get started!