Dealer Insights - Jan/Feb 2011 - Dealer Digest
Could your streetlights save you ’10 tax dollars?
A recent U.S. Tax Court ruling may result in tax savings for many auto dealerships with a large number of streetlights. Taxpayers can classify these assets on their 2010 returns as seven-year property rather than 15-year property and realize tax savings. Eligible assets include light fixtures, mast arms or brackets, light poles, wires, and bases that are bolted to their foundations.
But, what if you installed the streetlights before 2010? You can still recapture the missed depreciation this year if you file IRS Form 3115, “Application for Change in Accounting Method.” The change doesn’t require advance IRS consent, which means no filing fee is required.
Consumer buying trends
Car purchasers are showing less dealership and brand loyalty, according to the 2010 Chrome Consumer Survey, which examines how buyers make their purchases. Of those polled, only 24% said they selected a dealer because they or someone they know had bought from that dealer in the past — down from 37% in 2009. And only 35% of the buyers purchased the same brand they had in the past.
Consumers indicated that vehicle availability influenced their choice of dealerships, with 20% saying they chose a dealer due to its online inventory listings. And 83% of respondents said they were likely to shop online before making a buying or leasing decision.
Why you should invest in your business this year
If you buy equipment or make improvements to your store, you might be eligible for an expanded tax break from Uncle Sam. Under the Small Business Jobs Act of 2010 (SBJA), the Section 179 expensing election limit has been increased to $500,000 for 2010 and 2011.
Under Sec. 179, you may elect to expense the cost of certain tangible personal property — equipment, furniture and off-the-shelf computer software, for example — in the year of acquisition, instead of recovering the costs more slowly through depreciation deductions. A dollar-for-dollar phaseout starts when your purchases for the year exceed $2 million. A business can claim the expensing election only to offset its net income, not to reduce net income below zero.
Also under SBJA, the definition of eligible property has been expanded for 2010 and 2011 to include up to $250,000 in qualified leasehold-improvement and retail-improvement property. And SBJA increased the eligible Small Business Administration loan from $2 million to $5 million.
Dealer Insights - Jan/Feb 2011