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In an earlier blog we explored the many benefits of installing a custom mezzanine in your facility, the major benefit being the ability to use build up, and take advantage of usually unused vertical space to create additional storage or work areas. Another big benefit is their possible tax benefits. Mezzanines can be considered as either personal property or real property. To quality as personal property, the mezzanine has to be movable and usually acts as an accessory to your distribution, processing or manufacturing equipment. If the mezzanine is permanently attached to the building and is most likely never going to be moved, it is considered real property, as it has become a function of the building. Here’s where the tax benefits come in - if your mezzanine can be considered depreciable personal property, the depreciation life is usually 5 or 7 years depending on the industry use. In addition, newly acquired personal property may also quality for a bonus depreciation deduction. On the other hand, if the mezzanine is considered real property, the depreciation life is over a 39 year period. Here are a few things to consider if trying to determine if your custom mezzanine is considered personal property, thus qualifying for tax benefits:
- Can your mezzanine be disassembled and relocated easily?
- Was your mezzanine built with the intent of possible relocation at a later date?
- Has your mezzanine been moved in the past?
- When you mezzanine was installed, was it bolted to the floor versus being directly cast into a poured foundation footing?
- Is your custom mezzanine freestanding?
- Is your mezzanine not supported or attached to your building structure, but instead just bolted to the floor.
- The sole purpose of your mezzanine is to be used:
- in a manufacturing application
- in distribution of packages
- as shelving or storage of inventory and supplies
- as a singular business purpose
