Your Fixed Assets Can Generate Cash for You
By Alex Bagne, JD, MBA, CPA, Senior Tax Manager
For Capital Good Purchases, Favorable Tax Treatment Set to Expire
From the tax perspective, now is a good time to purchase capital goods thanks to the availability of the 50 percent bonus first-year depreciation. However, these tax breaks are set to expire after 2009 unless Congress extends them. Businesses may be able to lock in accelerated deductions by buying qualifying assets this year and placing them in service before 2009 year end.
For example, if a taxpayer buys a $10,000 machine depreciated over five years for tax purposes, the taxpayer would be able to depreciate $6,000 in the first year if placed in service by December 31, 2009. However, if bonus depreciation is not extended, then the taxpayer will only qualify for a $2,000 first-year deduction in 2010. The generous bonus depreciation rule similarly applies to first-year limits on luxury automobiles.
Tax Savings through Fixed Assets
If interested in maximizing depreciation deductions, BMF performs several types of studies that optimize fixed asset deductions. These studies drastically improve cash flow by accelerating tax depreciation deductions. While BMF performs traditional cost segregation studies, we are the only firm with Fixed Asset Express. This powerful, internally developed software analyzes property and equipment registers, identifies tax-saving opportunities and automatically quantifies benefits.
The Opportunity
A fixed asset review evaluates all of a company’s fixed assets and identifies those qualifying for shorter depreciable lives, such as:
Moreover, since bonus depreciation is applicable to certain assets with tax lives of less than 20 years, there is an added incentive to identify assets originally depreciated as buildings qualifying for shorter depreciable lives.
Not only do we search for assets qualifying for shorter depreciable lives, we identify expenditures that can be immediately expensed, such as:
For Capital Good Purchases, Favorable Tax Treatment Set to Expire
From the tax perspective, now is a good time to purchase capital goods thanks to the availability of the 50 percent bonus first-year depreciation. However, these tax breaks are set to expire after 2009 unless Congress extends them. Businesses may be able to lock in accelerated deductions by buying qualifying assets this year and placing them in service before 2009 year end.
For example, if a taxpayer buys a $10,000 machine depreciated over five years for tax purposes, the taxpayer would be able to depreciate $6,000 in the first year if placed in service by December 31, 2009. However, if bonus depreciation is not extended, then the taxpayer will only qualify for a $2,000 first-year deduction in 2010. The generous bonus depreciation rule similarly applies to first-year limits on luxury automobiles.
Tax Savings through Fixed Assets
If interested in maximizing depreciation deductions, BMF performs several types of studies that optimize fixed asset deductions. These studies drastically improve cash flow by accelerating tax depreciation deductions. While BMF performs traditional cost segregation studies, we are the only firm with Fixed Asset Express. This powerful, internally developed software analyzes property and equipment registers, identifies tax-saving opportunities and automatically quantifies benefits.
The Opportunity
A fixed asset review evaluates all of a company’s fixed assets and identifies those qualifying for shorter depreciable lives, such as:
- Land improvements, such as storage sheds misclassified as buildings
- Specialized plumbing or electrical used in process-related activities
- Furniture, countertops and kitchen equipment
- HVAC equipment used for cooling computer equipment or perishables
- Software misclassified as computer equipment
Moreover, since bonus depreciation is applicable to certain assets with tax lives of less than 20 years, there is an added incentive to identify assets originally depreciated as buildings qualifying for shorter depreciable lives.
Not only do we search for assets qualifying for shorter depreciable lives, we identify expenditures that can be immediately expensed, such as:
- Roofing and parking lot repairs
- Carpet replacement
- Repainting
- Equipment and building maintenance
- Repairs due to severe weather or accident
Our Process
With the power of Fixed Asset Express, BMF can provide a preliminary analysis at no cost to our clients. By providing a simple download of your fixed asset register, we can input your assets into our system and quantify the benefits within as little as one day. BMF delivers turnkey solutions or we can utilize your employees to reduce costs. We also deliver highly detailed project summaries that support our positions if a project ever receives IRS scrutiny.
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If you would like to explore how your business may optimize its tax position through an assessment of its fixed assets, contact Alex Bagne at 330.255.4404 or by email.