General Practice, Solo & Small Firm DivisionMagazine Jimmerson

Tax Deductions for Older Machines

© American Bar Association. All rights reserved. J. Michael Jimmerson is a lawyer, author, and technology consultant. He is the co-author of A Survival Guide for Road Warriors , a best-selling book on mobile computing for lawyers, published by the ABA. His upcoming book is Windows for Lawyers . He can be reached by phone at 312/507-3005 or by e-mail at

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Two things you can always count on for spending your hard-earned dough are technology and taxes. How would you like a way to ease both problems with one solution? Last year, Congress passed the Taxpayer Relief Act of 1997.

Now, usually these measures only help fat cats and pork barrel politicians. However, the Taxpayer Relief Act of ’97 included a measure that will help you recycle your old computers to schools and get a tidy deduction at the same time. Not a bad deal at all.

The 21st Century Classrooms Act provides that any qualifying business (any C corporation) can deduct the full purchase price of any computer that it donates to a K-12 school within two years of the date of purchase. This is a significant improvement over the old law. Prior to this act, you could only deduct the resale value of the PC. This bill took effect January 1, 1998, and lasts until December 31, 2001.

The purpose of the act is obvious: it provides an incentive for businesses to donate newer equipment to schools that badly need more up-to-date computers. Law firms have typically not donated their old equipment because they have held onto it way past its useful life. Hopefully, this measure will cause law firms to rethink their acquisition and disposal plans.

In addition, this bill dovetails nicely with the spiraling rate at which new technology is rolled out. Not so long ago, the useful life of a personal computer was three years and this could be stretched to five years if you were not too picky. However, faster machines and more demanding technology are being introduced at ever increasing rates.

For example, in the spring of 1997, the fastest machine was a Pentium MMX running at 200 MHZ. I know because I bought one. Exactly one year later, the fastest machine was a Pentium II running at 450 MHZ. If you are buying computers for your law firm, it is hard to keep apace of newer and faster technology. Not to mention accommodating the bottom line. Another looming problem is the millennium bug that could fell your older computers because the BIOS is date dependent.

But if you take advantage of the 21st Century Classrooms Act, you can kill several birds with one stone. You can retire machines earlier and move to faster hardware. This can be accomplished at little additional cost because you have landed a sizable tax deduction for your old machines—certainly, more than the pittance you might have gotten from selling the machines.

Also, you can achieve some positive good in your community; maybe even help out the schools where your kids (or your staff’s or client’s kids) are studying to become the Bill Gates’s of the future. You might even be able to spin some positive public relations or media attention from the whole thing unless the very thought turns your stomach.

Start by taking an inventory of the personal computers around your office that could be replaced. Devise a strategy for replacing your personal computers on a cyclical basis, then consult your accountant about how to take advantage of the 21st Century Classrooms Act. CL

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