While there are many reasons to choose modular over conventional construction, did you know that investing in a Starrco modular building can provide a substantial tax advantage you just cannot get with stick-built projects?
Starrco Qualifies as Tangible Personal Property
Under the tax law, Starrco modular systems qualify as tangible personal property. That means you can depreciate a Starrco modular building in the same way as other capital equipment such as forklifts, rack and machinery.
Starrco modular systems qualify because, unlike conventional buildings (designated as real property), our modular buildings and portable construction offices can be fully dismantled, relocated and reassembled.
Generally, tangible property is depreciated over 7 years. That is a great deal considering conventional construction is depreciated over 39 years.
But, it gets even better:
In 2015, Congress extended bonus depreciation and agreed to a $500,000 capital expensing limit under Section 179 of the Internal Revenue Code.
The program is designed to stimulate the economy and encourage investment in capital goods. When you reduce the amount of time it takes to claim tax depreciation on equipment expenditures, you have more money to reinvest into your business’ future success. Getting access to that money gives you options. One such option for that new found money could be to build a larger Starrco structure to accommodate future expansion.
NOTE: Conventional construction must be depreciated over 39 years and does not qualify for this program. Speak to your tax advisor to find out how Section 179 can be applied to your particular situation.
How Does the Bonus Depreciation and Section 179 Changes Benefit Starrco Buyers?
Currently, you can expense up to $500,000 of tangible personal property under Section 179.
So, if you spent $20,000 on a Starrco modular office system, you should be able to expense the entire cost and still be able to expense an additional $480,000 on other qualified capital expenditures!
Let’s Look at the Numbers and Some of the Rules
Spend less than $500,000 on capital equipment:
- You can likely expense the entire value of your Starrco modular purchase in the year you buy it and put it into service.
Capital equipment spending exceeds the $500,000 deduction limit:
- You will probably qualify for 50% bonus depreciation on your Starrco building in the first year.
- The balance is depreciated over the following 7 years.
Key Section 179 rules you should know:
- There is an overall capital investment limit of $2,000,000, but if you buy less than that you should be able to expense the entire amount of the building in the year it was placed in service.
- Also, if you purchase more than the $2,000,000 capital investing limit, the $500,000 Section 179 limit is reduced dollar for dollar by amounts spent over the investment limit.
- Please note, the eligible amount to be expensed can’t exceed your business’ taxable income.