Tips to Save Money on Business Equipment
Thanks to inflation and the supply chain issues related to the COVID-19 pandemic, you might have a sticker shock the next time you shop for business equipment. Use these tips to save money.
Consider Alternatives to Buying
The best and most foolproof way to save money is not to buy the equipment in the first place. While not always an option, the recent increase in prices has caused consumers and businesses to reconsider the necessity of a purchase.
To save money, businesses can consider:
- Renting Equipment. Would it be cheaper to rent or lease equipment? When evaluating if your business needs to make an equipment purchase, consider how often you’ll use the equipment. If it’s a one-time or once-a-year need, consider renting instead of purchasing something that will spend most of the year in storage.
- Repairing Equipment. When shopping for replacement equipment, consider doing a cost analysis on repairs. How many more years of service could you get out of the equipment with a repair?
Maintain Your Equipment
Another way to save money and avoid buying new equipment is to maintain your existing equipment. While maintenance can be costly, investing in keeping expensive equipment in good condition will save you money in the long run.
Shop for Used Equipment
Much like buying a car, you don’t always have to buy a showroom new version of something. Look for second-hand equipment. Retail stores and restaurants often sell their fixtures and equipment when they go out of business. Look for liquidation sales in your area as a potentially money-saving way to buy the equipment you need. Companies also can find used equipment by searching online auction sites.
Join a Buying Group or Organization
Many professional organizations participate in buying groups where members receive special pricing from select vendors. Check your company’s professional associations and memberships to see if your business is eligible for any discounts.
Check for Coupons and Rebates
Coupons work for more than groceries. Business-to-business eCommerce borrows from consumer shopping trends. More business sellers offer coupons and rebates than in the past.
How to Save Money on Business Equipment with Taxes
Saving money on an equipment purchase is just one piece of the puzzle. Businesses also need to implement optimal tax strategies.
Equipment Deductions on Income Taxes
When purchasing new equipment, check to see if the purchase qualifies for any special income tax deductions. For example, state or local governments often implement deductions to encourage business development, such as deductions on brewing equipment, to increase the brewery economy in their state. Energy-saving or environmentally friendly purchases also often qualify for special deductions.
Saving Money on Business Personal Property Tax
Businesses often overlook personal property tax when trying to find equipment savings. But due to the complex nature of personal property taxes, many companies pay way more than they should.
Ways to save money on equipment with personal property tax include:
- Check for Duplicates. Businesses with multiple locations often record the same piece of equipment at different sites. You could be paying taxes three or four times for the same item.
- Remove Ghost Assets. If a business sells or disposes of a piece of equipment but leaves it on its fixed asset register, the company ends up paying taxes on something it no longer owns. Cleaning these “ghost assets” from your books should decrease your tax bill.
- Explore Asset Classification Options. An asset’s categorization determines the depreciation schedule your local tax office will use and ultimately how much a business pays in personal property tax. Categories and depreciation schedules vary by jurisdiction. Not every county even lists all the available categories on their pre-printed forms. Some categories depreciate faster than others, so businesses can find additional tax savings by identifying the most efficient category for their equipment.
- Identify Idle Equipment. Equipment not in use sometimes qualifies for an accelerated depreciation schedule. Review your asset register to determine if you could save money on any idle equipment.
- Review Construction in Progress. If you purchase equipment as part of a project, many states tax construction in progress at 100% with no depreciation. Carefully review your CIP accounts so you can move equipment into service and pay taxes based on the depreciated value.
How a CPA Can Help You Save Money on Business Equipment
Sharon H. Lyall, CPA, and staff can help your business save money. While our team can’t help you bargain hunt for computers or furniture, we can help ensure you don’t pay too much personal property tax on whatever equipment you buy.
We’ve dedicated our practice to assisting companies with their real estate and personal property taxes. We have the expertise to help you discover new tax savings.
To get started, we offer a free asset review. We’ll review your most recent personal property tax returns to identify potential savings by changing assets categorization or removing assets. Contact us today to get started.