Window For Tax Breaks Is Closing

The tax cut package passed by Congress in 2003 contains two provisions designed to benefit small businesses.

The first measure quadruples the amount of capital investment that small businesses can write off in the first year to $100,000 from $25,000. The second provision allows small businesses to depreciate 50 percent of the cost in the first year that the new equipment is put into service.

Both of these measures are a big plus for the channel.

JOHN ROBERTS Can be reached at (732) 919-1530 or via e-mail at jorobert@cmp.com.

That's because small businesses can use these federal tax breaks to invest in new technology solutions, opening up more opportunities for business technology integrators in the very market segment where IT spending already is growing the fastest.

What may not be as well known among small businesses or their solution providers, however, is that both of these tax breaks are currently scheduled to disappear at the end of 2004. This "sunset" clause was one of several put in place to keep the cost of the tax package within limits set by Congress.

Solution providers, therefore, have less than eight months to take advantage of these tax measures. And the time has never been better.

With the economy now in high gear, many small businesses are looking to grow through technology.

TICK TOCK Key small-business tax breaks ending this year >> Increase in capital investment write-off to $100K >> Increased depreciation of equipment cost in first year of use

Factors such as their ability to accrue new customers, increase worker productivity, improve business efficiency, and install or upgrade Internet capabilities are influencing their decisions, and technology solutions can play a significant role. E-commerce initiatives, in particular, are one area where small businesses can boost their competitiveness against larger corporations through strategic investments guided by solution providers.

The increased limit on investment write-offs means more small businesses will be able to boost technology spending throughout 2004. According to the National Federation of Independent Business, many small companies actually reached the old limit of $25,000 within the first three months of the year.

Solution providers' expectations for sales growth to the small-business market are at an all-time high, according to ongoing CRN research data. Use the tax breaks to help make these expectations a reality.

Are you playing the tax card? Let me know via phone at (732) 919-1530 or e-mail at jorobert@cmp.com.