Computer Software Deduction
The general rule for business software says you must depreciate costs over 36 months. But there are some exceptions you can take advantage of. Specifically:
- When software is bundled with hardware and sold for a single price, you can treat the whole setup as a new computer. Then you may be able to take a Section 179 deduction for the entire cost.
- Some software programs, such as tax preparation packages, are really in the nature of subscription products. These should be treated as “abandoned” and written off as soon as they lose their usefulness. If a program will be good only for one year, deduct the entire cost in the year of acquisition.
- Even if you are stuck with the 36 month rule, you can acquire software this year, you can claim first – year bonus depreciation equal to 30% of the cost. The remaining cost then can be written off over 36 months.