The tax reduction program Congress approved this spring contains a little-publicized benefit for companies hoping to buy big-ticket equipment in the next two years: an accelerated depreciation schedule.
An analysis provided by Creative Storage Systems, a designer of gravity-flow storage systems, indicates that equipment placed in service between May 6 of this year and Jan. 1, 2005, is allowed a 50-percent bonus depreciation allowance for the first year in service. According to that analysis, an asset that cost $700,000, for example, would be eligible for $50,000 in standard depreciation and $350,000 in bonus depreciation in that first year. In years two through seven, the depreciation allowance would be $50,000 per year.
This information comes with an important caveat: Neither Creative Storage Systems nor DC VELOCITY is in the tax advice business; companies planning to purchase equipment should consult with a tax specialist regarding requirements and conditions. But for businesses that have been holding off on equpment purchases, the new rules, combined with low interest rates, could provide an incentive to get on with their capital spending.