Government tax initiative for pallet rack & shelving purchases...
March 21, 2011
Tax initiatives fuel a temporary change in deductible expenses that benefits customers only if used in 2011
If the shelving is a capital expense for the customer, and if the shelving is installed and in use by December 31, 2011, the new law can be advantageous if the customer wants to reduce their tax payments to the IRS.
Under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 tax law, Interlake Mecalux customers may use 100 percent of their federal tax deductible up front in 2011, instead of smaller annual deductions spread out over the life of the product.
If the customer purchases and installs $10,000 of brand new shelving in 2011, the customer will be able to deduct 100 percent of the capital expense from their taxes. If the customer waits until next year to purchase and install $10,000 of brand new shelving in 2012, that customer will be able to deduct only 50 percent of the capital expense from their taxes.
Here is a specific example:
$10,000 shelving capital purchase. The IRS allows a 100 percent deduction in 2011. That $10,000 at the corporate tax rate of 35 percent saves the customer $3,500 paid to the IRS in 2011. $10,000 purchase price, less $3,500 saved in taxes, leaves an indirect cost of only $6,500!
$10,000 shelving capital purchase. The IRS allows only a 50 percent deduction. That 50 percent ($5,000) at the corporate tax rate of 35 percent saves the customer $1,750 in taxes paid to the IRS. The balance of the $5,000 deduction is spread out over, perhaps 20 years (the life of the asset).
If you'd like more information on this topic, please visit http://www.irs.gov/newsroom/article/0,,id=233907,00.html