If you purchase equipment in 2011, you can take advantage of greater depreciation bonus expensing, but you have to plan ahead. Here are some considerations.
Assessing needs. If you’ve been thinking about an equipment purchase, be sure to assess exactly what you need. Then research suppliers and obtain quotes to determine whether it’s cost-effective to make the purchase now.
Lead time. Since some of the depreciation rules allowing 100 percent expensing will apply only through December 31, 2011, make sure you allow enough lead time to for your equipment to be ordered, manufactured, delivered and placed into use before the end of the year. You should begin this process soon – depending on the equipment, you may need several months lead time.
Financing. Lenders are taking more time and requiring more documentation before they approve loans for large equipment purchases. You may need to gather additional financial information or statements during the loan application process – so make sure you allow for the time to accomplish this.
2011 vs. 2012. The 100 percent depreciation bonus only applies to 2011. If you purchase new equipment that is placed into service in 2012, it will only be eligible for 50 percent bonus depreciation.
New vs. used. The depreciation bonus applies only to new equipment that meets specific requirements. However, you can apply Section 179 depreciation (another type of 100 percent asset depreciation restricted to companies with net income) to both new and used equipment, so your company may still see benefit from purchasing used equipment now. You can also combine bonus depreciation and Section 179 for an even greater tax savings.
Contact our Ohio manufacturing tax specialists
We can help you through the equipment purchase process by helping you assess its cost-effectiveness, providing financial records that you may need for financing and finally during tax filing to take maximum advantage of depreciation bonus and Section 179 expensing. For additional information on the benefits of purchasing, click here to contact Rea & Associates.