Modular Tax Depreciation Benefits

The current tax laws allow very favorable depreciation on all HMC modular offices, portable buildings and mezzanines.  These products qualify for a 7-year depreciation period while conventional construction is depreciated over 39 years. Conventional construction, by its nature, becomes a permanent structural addition to a building, and thus it is classified as “real property” with the longer 39-year depreciable life. Harrelson Modular's products, on the other hand, can be fully dismantled, relocated, and reassembled.  This mobility, under the Modified Accelerated Cost Recovery System (MACRS), allows the our products to be classified as “tangible property” with a shorter 7-year depreciable life.

Example: Assume the cost of a new office is $20,000.  At the end of 8 years, (1/2 year depreciation in the year of acquisition and in the 8th year of the life of the office) our Modular Office System has fully depreciated and reduced taxable income by the original $20,000 cost.  Conversely, the conventional construction has depreciated 21% and reduced taxable income by only $4,103.  Assuming a 34% tax rate you pocket $5,405 in tax savings over the first 8 years.


Construction MethodCost8 Year Depreciation DeductionTax Rate8 Year Reduction
HMC Modular Office  $20,000                      $20,000     34%           $6,800
Conventional Construction  $20,000                      $4,103     34%           $1,395
8 Year Tax Savings - - -            $5,405

 If the difference in the reduction of taxes ($5,405) were invested at 8% for the remaining 31 years, the result would be substantial and could approach $64,000. In addition to the above MACR depreciation, section 179 of the Internal Revenue Code allows you to expense up to $250,000 of tangible personal property purchased during 2014 and includes a 50% first year bonus depreciation.  Therefore, depending on the amount of your capital expenditures in 2014, you may be able to expense your entire project. Since tax laws are constantly being modified, we suggest that you consult with your company accountant to determine the application of these provisions. 

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