Component Depreciation: A Tax Planning Strategy for Small Businesses
Recent federal court and Internal Revenue Service (IRS) decisions have opened up an excellent opportunity for both small and large businesses to once again use component depreciation, thus accelerating depreciation deductions and reducing cost of buildings and improvements in present value terms. Minor changes in the design or in the procedures followed in purchasing a building make it possible to shorten the depreciable lives of portions of the "building". The savings can easily exceed the additional design, construction, and bidding costs especially if the changes are minor. Small business owners, who may not always retain a fulltime tax advisor, should be aware that it is necessary to involve a tax consultant at the beginning of the design process for construction projects or early in the search for a building purchase.