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The law cut the corporate rate to 21 percent from 35 percent, and allowed companies to deduct the full cost of new equipment investments in the year that they m
by ab_testing 7y ago
The law cut the corporate rate to 21 percent from 35 percent, and allowed companies to deduct the full cost of new equipment investments in the year that they make them.
The key takeaway of the whole article is right here. So to reduce its tax bill, FedEx made some equipment purchases and decided to deduct the full cost bringing down its tax liability to zero.
However that means that next year, FedEx would not be eligible to depreciate that equipment. So next year it should be back to paying regular taxes or trying to find another strategy to reduce its tax bill.
- RugnirViking 7y agoFedEx is a huge company. They are almost certainly going to buy equipment every year
- ijiiijji1 7y agoYep. Lifecycling budget.
- Arnt 7y agoIn that case it would make no difference. Depreciation works like this: When you spend a million on equipment, you get to claim a certain percentage of its cost against taxes every year until you reach 100% and the equipment is projected to require replacement. For equipment with a projected lifetime of five years the percentage is 20%. For equipment that will be replaced next year the percentage is 100%, and this rule would makes no difference. Effectively, FedEx got to make claims in one year that it would otherwise have to spread over n future years.