
A Break for Small Business - MaysonL
http://www.bloombergview.com/articles/2016-01-04/a-break-for-small-business
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terravion
This is huge for companies that do anything with their own hardware. $2M in
capex per year a is pretty good sized company. That's a lot of servers or
senors or computers.

This also probably mimics a start-up's actually valuation of their equipment.
It costs money to buy, but after it goes in use, there's nothing that a banker
can sell or mortgage against--not to say it isn't a economic asset, but when
has tax accounting ever been about that?

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toomuchtodo
Also huge for companies who have to decide between their own hardware and AWS
or other cloud providers.

Previously, you'd pick a cloud provider because the cost is considered opex
and you could write it off in the same year (let them do the depreciation, you
get the tax savings immediately). Now, you might be more willing to consider
buying your own gear if your cloud provider spend is under half a million
dollars a year (perhaps even more).

Yeah, sure, cloud providers make scaling easier (but then again, you're
probably not Reddit, needing to scale on a dime to thousands of VMs). But you
get to spend $500K/year on gear and that gear is YOURS for its life.

Disclaimer: Devops/Infrastructure Admin/Tech Consultant who does this math all
the time.

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snowwrestler
Maciej Cegłowski recently addressed this decision in his "Website Obesity"
talk:

[http://idlewords.com/talks/website_obesity.htm](http://idlewords.com/talks/website_obesity.htm)

The whole talk is worth a read, but here's the key part about servers:

>But where the projects differ radically is cost. ACME hosts their service on
AWS, and at one point they were paying $23,000 (!!) in monthly fees. Through
titanic effort, they have been able to reduce that to $9,000 a month.

> I pay just over a thousand dollars a month for hosting, using my own
> equipment. That figure includes the amortized cost of my hardware, and sodas
> from the vending machine at the colo.

> So while I consider bookmarking a profitable business, to them it's a
> $4,000/month money pit. I'm living large off the same income stream that is
> driving them to sell their user data to marketers and get the hell out of
> the game.

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rbritton
One of the biggest things that personally has affected me is that the section
179 deduction is applied _after_ the 15.2% self employment tax hits. Does this
change that at all?

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prbuckley
What drives me crazy about things like this is the law passes Dec 18th and you
have to buy equipment by Dec 31st to take advantage of this in 2015. Every
year congress waits until the very last minute to set tax code which makes it
impossible to actually plan for purchases as a small business.

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petercooper
We have something like this in the UK called the AIA (Annual Investment
Allowance). The amount seems to vary every year but is currently £200,000. It
certainly makes life a lot easier to know you can immediately get a deduction
for buying office equipment, etc. (You still need to do normal depreciation
calculations for accounting and balance sheet purposes, but tax paid reflects
a 100% deduction.)

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danvoell
This is good for manufacturers. I wonder if it will incentivize companies to
create shells to get around 500k limit?

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marme
this seems good but bigger businesses will just abuse it. It was a good idea
to limit the dollar amount to 500k. Now all corporations are going to write
off 500k of equipment every year. Possibly even writing off 1 million as they
just buy 500k worth of computers write off the purchase then donate the
computers to a local school and write off another 500k. This was one of the
reasons that the deductions previously was based on the yearly depreciation to
prevent companies from just buying new equipment every year to avoid paying
taxes

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evanpw
> Possibly even writing off 1 million as they just buy 500k worth of computers
> write off the purchase then donate the computers to a local school and write
> off another 500k.

You can't deduct anything for donations of fully depreciated property, so this
trick wouldn't be legal.

And buying equipment that you have no use for just to avoid taxes wouldn't
make any sense, since you're spending $X to save 0.35 * $X in taxes.

