Economic Stimulus Act offers tax deductions on equipment purchases

Companies in the right situation can enjoy significant tax benefits for buying materials handling equipment this year, but a spike in equipment sales is unlikely.

By Corinne Kator, Associate Editor -- Modern Materials Handling, 4/15/2008

If the shaky economy has you putting the brakes on plans to buy new equipment this year, you may want to put those plans back in motion.

Investing in capital equipment before the end of 2008 could result in significant tax benefits thanks to the Economic Stimulus Act that Congress passed earlier this year. In addition to the individual tax refunds we’ve heard so much about, the stimulus package also includes two less-publicized provisions that offer businesses increased tax deductions on purchases they make before the end of the year.

The details of the two provisions are tricky, but the bottom line, says Michael Cecere, a CPA with the Massachusetts accounting firm Gray, Gray & Gray, is this: “If you’re thinking about making a large expenditure, 2008 is a good year to do it.”

Cecere offers the hypothetical example of a company that buys and installs $500,000 of assets this year and writes off nearly 80% of the purchase at tax time. In another example, a larger company only qualifies to take advantage of one of the two tax benefits but is still able to deduct 57% of the cost of its purchases.

Despite these substantial deductions, the 2008 tax benefits probably won’t cause a spike in orders for materials handling equipment.

Major materials handling projects require months of planning, so it’s not likely that companies will suddenly decide to buy significant amounts of new equipment, says Hal Vandiver, executive vice president of the Material Handling Industry of America.

But, he adds, companies have plenty of time to identify solution-specific needs and make smaller purchases between now and the end of the year. In addition, he says, the tax incentives might encourage companies to go ahead with projects they’ve sidelined or to speed up timelines on existing projects to get them in under the deadline.

Lift trucks

Lift truck sales probably won’t get a big boost from the tax incentives either, says Industrial Truck Association president Stan Simpson. Lift trucks are seldom spur-of-the moment purchases, he says, and many lift trucks aren’t purchased—they’re leased.

But at least one major lift truck company is hoping the Economic Stimulus Act will encourage customers to acquire new lift trucks this year. During the upcoming NA08 tradeshow in Cleveland, lift truck maker Hyster will discuss the benefits of the stimulus package at a press conference. Bob Sattler, vice president of Hyster Capital, says his company is even making it possible for customers who lease (rather than buy) lift trucks to get some benefit from the 2008 tax incentives.