Content about Depreciation

CHICAGO — As the old saying goes, “knowledge is power.” Arguably nowhere is this truer than in how you handle your money. Knowing your true net worth is an essential part of building and maintaining a sensible approach to your financial affairs.

A precise knowledge of where you stand will help you make appropriate investment decisions, demonstrate how to handle debt, plan your estate, and other important financial matters. Equally important is the psychological comfort that comes with knowing where you really stand on the financial landscape.

At first glance, calculating your net worth may look like a quick and easy task; just add up all of your assets, subtract your liabilities, and you have it. But calculating true net worth is a bit more complicated than that. Among the easiest things to overlook when calculating liabilities are the costs associated with such things as real estate brokerage commissions and taxes resulting from liquidating certain assets such as 401(k) plans.

ARDMORE, Pa. — In an effort to resolve the controversy over whether certain expenditures made by a drycleaning business are currently deductible as repair expenses, or whether they must be capitalized and deducted over the life of the underlying business asset, the Internal Revenue Service has finally released new regulations.

The IRS’s long-awaited expanded regulations for determining whether an expense must be capitalized because it betters or improves tangible business property or equipment, restores it, or adapts it to a new and different use, will have a significant impact on every drycleaning business that acquires, produces, or improves its tangible property. 

In addition to clarifying and expanding the current rules, the new regulations create “bright-line” tests for applying the repair-or-capitalize standards, provides guidance for accounting for—and disposing of—repaired property, as well as clarifying other aspects of the repair/capitalize dilemma.

WASHINGTON — In the past, generous tax breaks for gas-consuming heavy SUVs often raised the ire of Congress. However, last December’s Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 actually made tax breaks for these assets even more generous. Although probably unintended, the limited-time 100% “bonus” depreciation allowance includes a new, heavy SUV purchased and used for business.

That’s right, the entire purchase price can be written off in the placed-in-service year. A dry cleaning business that buys and places in service a new heavy SUV—those built on a truck chassis and rated at more than 6,000 pounds gross (loaded) vehicle weight—after Sept. 8, 2010, and before Jan. 1, 2012, and uses it 100% for business, may write off its entire cost in the placed-in-service year. There is no specific rule barring this result.

ARDMORE, Pa. — Thanks to the 100% “bonus” depreciation write-offs created by the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, many dry cleaning businesses are discovering that capital investments in equipment, machinery and other business assets are more affordable today than ever before. Remember, however, the 100% bonus depreciation write-off is available only for qualifying purchases made by dry cleaning plants and businesses in 2011.

Those dry cleaners that have hesitated or postponed making capital investments because of the recent economic downturn might now want to consider how the combined use of incentives and the 100% bonus depreciation can substantially reduce the cost of capital investments. Even funding those new-equipment purchases is easier—at least for a while.

Most drycleaners take their paperwork to their accountant just before the April 15th deadline and hope for the best. But by being proactive, you can fine-tune the outcome, anticipate cashflow needs, reduce the chance of penalties and lower accountant fees.