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Deduction of Fixed Assets

Deduction of Fixed Assets

June 19, 2024

The Senate still needs to vote on the bill that would delay the phase-out of bonus depreciation (currently scheduled to go down to 60% in 2024 from 80% in 2023). In the meantime, businesses should consider the benefits of Fixed Asset Scrub as part of their tax planning strategy.

Fixed Asset Scrub

Working with our team, we can review or scrub your fixed assets inventory to determine if there are depreciable assets that may be considered for a shorter depreciable life.

For example, if you have real estate investments, specific improvements can be deemed "qualified improvement property." In this case, we may be able to reclassify these improvements and make them eligible for a shorter 15-year recovery period and bonus depreciation.

Scrubbing your fixed asset inventory may also reveal "ghost assets." These are assets listed on your inventory that you no longer have. Ghost assets can occur when an asset is lost, stolen, disposed of, or no longer in use. These ghost assets can damage your financial statements, which is another reason to perform an inventory audit on a regular basis.

Often, when a real estate investor buys a new property, among many costs involved, there is a loan cost that needs to be capitalized and amortized over the life of the loan. When the loan is refinanced, the accountant and/or investor often forget to "dispose" of the old loan cost. Recently, the CM team cleaned up the old capitalized loan cost and gave our client over 10K in tax deductions.

Materials and Supplies

Scrubbing your accounts should include spare parts and consumables (fuel, lubes, water, chemicals, etc.) used in the next 12 months. These items should cost no more than $200 each and have a "shelf life" of 12 months or less. Identifying these items can give you a cash tax benefit if there is a modification in how your business records its financial transactions.

Tax planning is a year-round process, and your business deserves a team that will work with you to ensure you receive the maximum tax deductions.

Contact Cambaliza McGee, LLP, to discuss the latest bonus depreciation information and conduct an asset scrub.