If you are looking to get the most tax “bang” out of your capital investment “buck”, now may be the time to buy. According to an article prepared by Pro-Mach in this month’s edition of Packaging Digest, 2008 tax incentives have been extended to cover capital investments made in 2009 as well. Under the American Recovery and Reinvestment Act, the allowable amount companies can deduct from annual income has been increased from $128,000 to $250,000, and a bonus depreciation factor of 50% will be applied to capital expenses.

This means that companies have an opportunity to lower their taxable income and decrease the amount of time it will take them to recover their initial investment. The article is careful to warn that in order to take advantage of these incentives, companies must have capital investments “in service by 2009”. So, if you’re mulling the idea over, it would be a good idea to give the project priority.

Times may be tough, and cash may be sparse, but if your company has a need to expand or make plant investments, this tax stimulus may represent a great opportunity to make a strategic move. Of course there are many factors to consider before determining whether or not your company’s financial situation can tolerate a capital outlay, but this incentive makes it worth while to at least investigate the possibility. As I pointed out in an earlier post, indecision is not an acceptable decision in these situations. A “wait and see” attitude will certainly cause this opportunity to disappear. If managers perform a proper assessment of their organization’s current level of risk exposure and consult their tax planner for some additional information, they should be able to understand whether or not this tax stimulus is enough to incentivize them to buy in the short-term
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Steve Tatum

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