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Implications of the new tax Law effective this year


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I have been recording my machines as assets, and as such my accountant has to record depreciation on them... but if I'm not mistaken now we can expense out any machine that costs less than $2500? That's a HUGE benefit for a lot of vendors, right? Granted, it might not make a difference for the larger vendors who primarily buy new machines anyways.

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I have to talk to my accountant but I think that was the change last year, not sure.  Am also not sure if you can just convert to expense an asset already being depreciated.  This year’s changes should make it easier to expense almost everything out as we buy it if I am understanding it correctly....

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31 minutes ago, Southeast Treats said:

I have to talk to my accountant but I think that was the change last year, not sure.  Am also not sure if you can just convert to expense an asset already being depreciated.  This year’s changes should make it easier to expense almost everything out as we buy it if I am understanding it correctly....

Funny you should mention it, the number one question I have for my accountant is if it's possible to convert all of my FA's into expenses. 

Logic would say yes - one point of this new law is to help businesses do their accounting more easily, and to provide businesses with more money so they can go invest more into their business/the economy - IN CONCLUSION - you'd think there would be ways written into the law to allow businesses doing things the old way - to easily transition to the new way of doing things 

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You are correct....sorta.  You are not converting an asset to an expense.  I believe that you are allowed to depreciate the asset all at once which the depreciation IS an expense). You actually have a choice, either take the whole depreciation deduction now, OR depreciate the asset over time.   However, once you elect to depreciate the asset over time, you have to stay with that schedule and can't switch and deduct the rest of the depreciation all at once.  Talk to your accountant about it.  There are definitely advantages to both.  If you are having a HUGE year and end up in a higher tax bracket, then DEFINITELY depreciate all at once to bring that taxable income down.  However, if you don't benefit much by taking the depreciation deduction all at once (say you have a slow year and all total deduction would just put you as showing a loss), then it may be more advantageous to take the scheduled depreciation deduction.  

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If you're in this business for the long haul then depreciate your assets over 7 years.  You can still expense any new assets if you choose.  This is only for durable assets, business equipment and vehicles.  Just remember that when you sell any depreciated asset in the future you must recapture that depreciation on your next tax return, unless you can prove it has zero value.  This is because depreciation is not tangible money but a virtual devaluation as though you are depleting it's worth.  Because this reduces your taxable income th IRS wants that value back for tax purposes so you have to prove any reduced value you claim.  That's why in many years past Polyvend offered leases on their equipment which allowed all machine payments to be expensed and then at the end of the lease you could buy the machine for $1.  

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