Laundromats should know that their finances can potentially be impacted as a result of one particular tax break expiring.
Individuals involved in the laundry industry might benefit from knowing that the bonus depreciation tax break expired at the end of last year, according to PlanetLaundry. People running facilities involved in the washing and drying of laundry could potentially harness the knowledge that they might still be able to make use of this particular policy if they started using certain items in calendar year 2013.
Bonus depreciation saves major companies billions, says expert
Companies have previously harnessed this particular tax break to get back substantial amounts of money, and one particular financial expert has estimated that major firms generated billions in tax savings in 2011 as a result of making use of the policy, The Wall Street Journal reported. David Zion, who works for financial research firm ISI, has stated that during that year, companies listed in the S&P 500 Index used the tax break to bolster their aggregate cash flow by an estimated $79 billion.
Zion wrote in a note to clients that since the policy reduces the taxes that companies have to pay, the influence that it can have on the cash flows and expenditures of corporations can be substantial, according to the news source. He estimated that cash flows could be lowered by $67 billion per year in the event that the tax break is not renewed.
Equipment financing strategies
While the tax break has already expired, some companies might still be able to make use of this particular benefit. Firms that harnessed previously-used equipment during calendar year 2013 have the option to reduce their tax liability for the period by claiming a 50 percent bonus depreciation deduction, PlanetLaundry reported.
However, even then, companies that are involved in the laundry industry might be wise to keep in mind that making use of this particular tax break can potentially cause their financial results to become more volatile. Claiming deductions for bonus depreciation can cause sharp fluctuations in cash flows.
This challenge was noted by Zion, who wrote that the policy “distorts cash flows,” according to The Wall Street Journal. “It drives them up temporarily when it’s in place and pulls them back down again when it goes away,” he said.
Individuals involved in the operation of laundromats can potentially derive substantial benefit from using this particular tax break, but need to keep in mind that it could make their financial results more volatile.