Every year businesses attempt to manage year-end spending and payments to maximize tax benefits. I am not a tax accountant or CPA, so check with your tax specialist to validate your situation.
Congress has allowed accelerated deprecation for most business equipment purchased and used for business. However, the tax regulations specify the equipment must be “placed in service”, not just received by year-end. If you purchased a new $5,000 computer, wanting to take the tax deduction in 2011 the computer cannot be in a box sitting in your back room, but must be placed in service.
If you are receiving any equipment subject to the accelerated depreciation, you must find a way to pace the equipment in service during 2011.
One client ordered $40,000 in new equipment, wanting to take the deprecation this year. Several delays have pushed back the delivery until after Christmas, when they were planning to close until January 3rd. I suggested they review the tax consequences with their CPA who confirmed the equipment must be placed in service. Unfortunately, the business will need to open, receive the deliveries and get everything into service, cutting into expected downtime. Given the tax savings, the effort will be necessary to save the deduction in 2011.
Keep in mind there is no assurance what the 2012 tax code will allow, Congress can, and may make changes affecting depreciation you can take. If you are able to claim deprecation in 2011, take the deduction now. King Solomon wrote, “The hand of the diligent will rule…” (Proverbs 12:24 NIV) and our diligence at year end will help keep out tax bill to a minimum.
Steve Marr, Your Christian Business Coach
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