The current tax laws allow very favorable depreciation on all Starrco modular offices, portable buildings and mezzanines. These products qualify for a 7-year depreciation period while conventional construction is depreciated over 39 years.
Conventional construction, by its nature, becomes a permanent structural addition to a building, and thus it is classified as "real property" with the longer 39-year depreciable life.
Starrco products, on the other hand, can be fully dismantled, relocated, and reassembled. This mobility, under the Modified Accelerated Cost Recovery System (MACRS), allows the Starrco products to be classified as "tangible property" with a shorter 7-year depreciable life.
Example:
Assume the cost of a new office is $20,000. At the end of 8 years (Y2 year depreciation in the year of acquisition and in the 8th year of the life of the office) the Starrco Modular Office System has fully depreciated and reduced taxable income by the original $20,000 cost. Conversely, the conventional construction has depreciated 21 % and reduced taxable income by $4,103. Assuming a 34% tax rate you pocket $5,405 in tax savings over the first 8 years.
Construction Method Cost 8 Year Depreciation Deduction Tax Rate 8 Year Reduction Starrco Modular Office $20,000 $20,000 34% $6,800 Conventional Construction $20,000 $4,103 34% $1,395 8 Year Tax Savings $5,405
If the difference in the reduction of taxes ($5,405) were invested at 8% for the remaining 31 years, the result would be substantial and could approach $64,000.
The accelerated depreciation for Starrco products means faster recovery of the total cost.
Under Section 179 of the Internal Revenue Code, tangible property may be treated as an expense deduction rather than a capital expenditure. The maximum deduction allowed for in 2003 is $25,000.
Since tax laws are constantly being modified, we suggest that you consult with your company accountant to determine the application of these provisions.
Updated May 2003
