While we see our personal computers more than our servers, we interact with them directly or indirectly all day long. Within our office, servers are the heartbeat of the entire network. Since we rely on them without directly interacting with them, we tend to forget that they’re there. However, just like any other type of computer, servers can expire and need replacing from time to time. Have you checked your servers lately and followed the section 179 tax deduction?
Section 179 Deductions
For those who’ve been following our blogs this month, you’ll recall that our topic is Section 179 tax deductions. This section of the tax code allows you to write off purchases made for business purposes. It will also let you take the full value at once rather than deducting a percentage over multiple years. It doesn’t give you credit for the total cost of your business investments. However, it does allow you to legally avoid paying tax on the funds used for these purchases.
The purpose behind Section 179 is to give businesses a break when they are just starting out or expanding. This tax break allows them the chance of making a profit (or avoiding loss) while making major business purchases. While the total amounts are subject to change, the law allows a maximum deduction of $1,050,000 and the value of the property purchased to $2,620,000 for 2021.
Also, please be mindful that we are not tax experts. This information should not be taken as the final word. Every business and situation is unique. Please consult your company’s CFO or other tax and accounting professionals before making any decisions or purchases.
Are You Ignoring Your Servers?
As we mentioned earlier, your servers can be an “out of sight, out of mind” affair. However, if you are working on an internal network (in the same building or remotely). You are likely interacting with one or more servers throughout the day. Like computers, servers are subject to a finite lifespan, either becoming obsolete or just wearing down. This issue can cause several potentially critical problems for your business. For instance, network speed might become an issue. Slow servers affect the speed at which information travels through the office or between users of the network.
In addition, storage can become difficult to access. While servers typically have much more capacity than the average desktop or laptop, that isn’t to say that it’s unlimited. Cloud storage and data backup are becoming increasingly popular these days. However, there are situations where it would be preferable or necessary to stick to a local, physical server. For example, if your office deals with sensitive medical information, you’ll need to remain HIPAA compliant. Cloud storage may not be a safe choice for you. That means you’ll have to be extra diligent about keeping your on-site servers and backup systems healthy.
Backups Don’t Last Forever
Many of us remember when we first used floppy disks or CDs for our computers, thinking about how they would outlive us — only to have our expectations dashed with corrupted data after just a few uses. Backup systems in any form have limitations, such as magnetic tapes becoming demagnetized or servers getting an unexpected electrical charge. Whether you’re using a backup drive or a physical format, you need to understand that if you are archiving information that needs to be stored indefinitely, you’ll need to plan to transfer that data to another form of storage every 5-10 years, depending on technological advancements.
Due to their unique material and technology, M-Discs, a new data-storage format, are reported to keep data safe for 1,000 years. While that may be theoretically possible, try to convince the horde of dads who bought those 100-year lightbulbs for $40 apiece only to have them burn out in about a year! Remember that no matter what the company selling to you may say, nothing is permanent. If your data is worth keeping, it’s worth transferring every few years.
With that in mind, as the year comes to a close, perhaps this would be an opportunity to look over your current equipment and see where you stand. If you can’t find any records to tell you the age of the drive, checking to see when the first files were transferred could be a good place to start and at least give you a good estimate.
Benefit from Section 179, Now’s the Time!
Both servers and backup devices are important elements of many pieces of equipment that need to be updated and replaced at some point. If you’re coming to the end of 2021 and finding that you had a better year than expected, or have unused funds sitting around, take advantage of Section 179 deductions so that you can lower your tax liability while making business-critical equipment upgrades.
You’ll never know what tomorrow will bring, let alone next year or the year after. It’s impossible to predict if you’ll have the funds when the servers or backups fail or simply don’t have the time to address the issue. By upgrading your equipment while we’re still in tax year 2021, you’ll be setting yourself up for success for next year and possibly the years ahead! Should you have any questions about upgrading your server, contact us!