Warehouse systems and shelving that are a capital expense for the customer, and are installed and in use by December 31, can be depreciated 100 percent in accordance with a new tax law thereby reducing tax payments to the IRS.
Under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 tax law, 100 percent of the federal tax deduction may be taken up front in 2011, instead of smaller annual deductions spread out over the life of the product.
NOTE: This incentive is applicable to projects of all sizes, including multimillion dollar projects. This would lead to a savings of thousands, even hundreds of thousand of dollars: It provides a tax savings of one third the cost (depending on your corporate tax rate).
Here is a specific example:
$10,000 shelving capital purchase. The IRS allows a 100 percent deduction in 2011.
That $10,000 at the corporate tax rate of 35 percent saves the customer $3,500 paid to the IRS in 2011. $10,000 purchase price, less $3,500 saved in taxes, leaves an indirect cost of only $6,500!
$10,000 shelving capital purchase. The IRS allows only a 50 percent deduction.
That 50 percent ($5,000) at the corporate tax rate of 35 percent saves the customer $1,750 in taxes paid to the IRS. The balance of the $5,000 deduction is spread out over seven years, the life of the asset per the IRS MACRS schedule. (This depreciation schedule is also subject to other Bonus depreciation rules.)
Also, if the purchase of the warehouse system causes a loss to the customer in 2011, that loss can be used to offset previous years' profits, thus making it possible to even obtain a refund from the IRS, and customers with a net operating loss can carry forward the loss to offset future income taxes to the IRS. Please consult your tax professional for specifics related to your company.
The bottom line is that your bottom line improves if you purchase in 2011.
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