“I gotta pay $250K for this place and it’ll take HOW LONG to recoup it?”
So in addition to Mr. Obama’s §179 increase through the American Recovery and Reinvestment Act of 2009, he also brought back what is called bonus depreciation. The great thing about it for many new restaurant owners is that it allows you to take all those build-out costs and pick up potentially half of them or more the year you open your restaurant.
Let’s say that you decide to go for it and plunk down $25K for your McArnold’s (not to be confused with, ahem, that one place whose name rhymes with McSchonald’s) burger joint. You find and lease a great spot in a strip mall that is (important tax fact requirement to follow) at least three years old. Under normal tax depreciation circumstances, all of the build-out costs are typically spread out over either fifteen or thirty-nine years. Yikes. But with the Senate’s plan, you can take half of those costs and expense them on the first-year tax return for the business. That could emerge as a very large dollar amount. If you spend $175K for these costs and open your restaurant mid-year, you would be able to pick up over $90,000 in deprecation expense. Terrific tax savings for either 2009 or 2010.
Keep in mind that the initial year tax savings you enjoy will be offset by less deprecation expense, and hence, less tax savings in future years. But from my perspective, this is much like winning the lottery. Take the $115 million now instead of $198 million over twenty years. After all, who know what the future brings? That is, unless you ask Nostradamus.
Tags: American Recovery and Reinvestment Act, bonus depreciation, depreciation, McDonald's, Nostradamus, Obama, restaurant accounting