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Economic stimulus makes this a good time to implement facility upgrades

tax incentives for businessThe big news out of Washington the last couple of months has been on the tax rebate part of economic stimulus. What may have more impact on the economy, and will certainly have more impact on people in the warehousing or manufacturing business, are the business tax breaks that quietly came along with it. We’ll break them down into two primary areas…

Expensing election for Small Business

The new law doubles the amount of equipment that can be expensed in the year of purchase. For equipment purchased (and placed in service) for tax years beginning in 2008, 100% of the cost of the equipment can be written off for tax purposes, up to $250,000. This applies only in 2008. If a business purchases more than $1,050,000 in equipment in 2008, this expensing election is not available, but there is some relief there — see bonus depreciation below. Remember, the equipment has to be placed in service in 2008 to qualify, so if you want to take advantage of it, especially for some larger systems, the time to order it is not short…now would be better. If you’re considering a capital project in this range, you’ll want to explore it ASAP so it can get into service by the end of the year.

The other piece is Temporary bonus depreciation

Congress has used bonus depreciation in the past to encourage business investment (post September 11). The new law allows qualifying taxpayers 50% of the cost of qualifying equipment as first year bonus depreciation. As with the expensing election above, this provision is for equipment placed in service in 2008. The 50% bonus depreciation can be taken even if you exceed the $1,050,000 of equipment purchased in 2008, so even larger businesses can take advantage of this provision.

Also, bonus depreciation is available for new equipment (not used). Remember, this bonus depreciation is on top of regular depreciation claimed for tax purposes.

As you can see, these provisions have the ability to greatly enhance the return on investment for purchasing equipment in 2008.There can be great tax benefits from making that buying decision now, not later. Take this as a starting spot, though–as always, consult your tax advisor to make sure these benefits will apply to your particular situation. The stuff you use–conveyors, racks, safety equipment, packaging machinery, material handling equipment–will be included, but you need to be sure of that before you order.

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Scott Stone is Cisco-Eagle's Vice President of Marketing with more than thirty years of experience in material handling, warehousing and industrial operations. His work is published in multiple industry journals an websites on a variety of warehousing topics. He writes about automation, warehousing, safety, manufacturing and other areas of concern for industrial operations and those who operate them.

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