The new corporate tax law allows many business owners to receive a 20% deduction on their business incomes and enjoy 100% depreciation on qualifying assets in service from September 27, 2017 to December 31, 2022. Together, these provisions make the perfect combination for business growth and opportunities for a more efficient warehouse layout. We’ll explain why.
What Are Depreciable Assets?
A depreciable asset normally amortizes over several years until it is either sold or reaches the end of its life. All the business owner has to do is purchase, install, and use it for the asset to depreciate. Such assets can be tangible (i.e. buildings, machinery, and furniture) and/or intangible (i.e. copyrights, computer software, and patents). Cash, office supplies, and prepaid insurance, however, are examples of business expenses that cannot be depreciated. Unlike current assets which are purchased and disposed of within that year, depreciable assets are expected to last longer and have a determined “useful life.”
How Amortization Affects Your Business Taxes
With current assets, you receive an immediate tax write off for the entire expense. With depreciable assets, not so much; as mentioned, the cost is spread out over the asset’s life, meaning you can claim a percentage of the asset’s costs in amortization expense every year. For instance, if you bought equipment for $20,000, and its useful life was estimated at 10 years, the amortization expense would be $2,000 each year. When receiving the full expense write off immediately – the benefit is that it can reduce your business’ taxable income. This is when 100% depreciation of capital equipment is cost-effective.
Here are 3 ways 100% depreciation of capital assets allows your business to save more and grow faster
- It’s Immediate
The depreciation is accelerated; you get to deduct the cost of the asset in one year versus several
- More Available Funds
Getting more money back means you have more immediate funds available to spend on business investments
- Works as a Bonus Depreciation
Here is a partial list of products classified as depreciable assets in our industry that would qualify:
- Modular walls
- Lift Trucks
- Material handling equipment
- Production machinery
- Prefabricated Mezzanine Platforms
- All types of racks
- Dock Equipment
- Other equipment that is demountable relocatable, and removable
Call us today at 973-227-0018 to see how we can help you create space, maximize productivity, and improve profitability.