Whether your business needs some extra cash now or if your business is looking to grow, accelerated depreciation could be the bookkeeping tool you need. In this episode of the “M&A Minute” video series, Jake Johnson, President and CEO of Johnson Consulting Group, talks about how utilizing accelerated depreciation could help launch or grow your business.
What is Accelerated Depreciation?
“Accelerated depreciation is basically the idea that you depreciate assets more NOW, and less later, so that you have less taxable income right now,” says Johnson. This is especially handy for new business owners, or businesses with short-term cash flow problems. In short, if you write off high-valued assets sooner rather than later, the faster you can claim tax deductions.
When is This a Good Tool?
As with all good things, there is a down side to accelerated depreciation. If you’ve used your extra dollars to re-invest in your business to make enhancements, you’ll end up having to pay the taxes you’ve deferred later on–or when you sell. This is called depreciation recapture.
Here’s a few examples of how accelerated depreciation is a good idea:
- If your business is young and needs extra cash now
- If you’re not thinking about selling your business in the near future
- When you have new assets that are high in value, especially when you use them immediately after purchase
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Jake Johnson and the Johnson Consulting team created the M&A Minute to help business owners through the process of buying or selling a business. The M&A Minute utilizes Jake and the JCG team’s knowledge to give advice that helps individuals feel confident and at ease when going through one of the most important times of their lives, selling or purchasing their most valuable asset. The M&A Minute is released every other Thursday. You can watch episode 9 now. Follow us on Facebook, LinkedIn, and Twitter to get M&A Minute updates.