Again this year, digital billboard operators can benefit from a government program designed to stimulate the economy.
The American Taxpayer Relief Act, reinstated by Congress earlier this year, gives business owners the opportunity to lower their taxable income and free up cash by providing a 50 percent tax deduction on capital expenditures, including digital billboards
The Act also reinstated the Sec. 179 expensing levels to $500,000 through 2013, with a graduated phase-out once qualified capital expenditures exceed $2 million in the 2013 tax year. This allows small and medium-size operators to deduct the full purchase price — up to $500,000 — for capital expenditures such as digital billboards. This enables companies to significantly increase depreciation claimed in the first year, which can result in positive cash flows through tax savings.
Without accelerated depreciation, a digital billboard falls into the category of a capital asset and typically is depreciated over a recovery period of five to seven years, depending on the use of the billboard.
To qualify for tax savings, the equipment must be placed in service between Dec. 31, 2012, and Jan. 1, 2014.
Because this tax benefit includes both the purchase price and the cost of installation of the digital billboard, operators need to act fast to ensure their billboard can be installed by the Dec. 31st deadline. When factoring in manufacturing lead times, if you want to take advantage of this benefit this year, you need to act now.
As always, please be sure to consult with your tax professional before making any capital purchases or visit the Internal Revenue Service web site at www.irs.gov.