As a supply chain or logistics professional, we know you’re always looking for ways to boost efficiency, cut costs, and stay competitive. Did you know that there are tax benefits to investing in warehouse automation? Warehouse automation refers to using automated systems and software to improve the efficiency and productivity of warehouse operations. This technology includes automated storage and retrieval systems, conveyor systems, sortation systems, and robotics. Thanks to recent tax code changes, 2023 is an ideal time to upgrade your operations with automated solutions. Here’s what you should know about how investing in warehouse automation can streamline your operations, reduce labor costs, increase accuracy, and reduce your tax burden.

What are the benefits of investing in warehouse automation in 2023?

One of the key benefits of investing in warehouse automation in 2023 is the availability of bonus depreciation. First, let’s define bonus depreciation. Essentially, this is a tax incentive for businesses to invest in capital assets like equipment, machinery, and technology. This bonus allows you to deduct a more significant portion of the asset’s cost in the year it is placed in service, thereby reducing your taxable income. Plus, you can claim bonus depreciation in addition to standard depreciation, resulting in even more significant write-offs that can help you realize a faster ROI on your automation investment.

Why is this so important now?

In 2023, bonus depreciation rates will be at their most generous, thanks to the Tax Cuts and Jobs Act passed in 2017. You’ll be able to deduct 100% of the cost of most assets (including automation technology) in the year they are placed in service. The property must be new and utilized in the business to qualify for bonus depreciation. Used property and property that has been previously leased do not qualify for bonus depreciation. In addition, the property must have a recovery period of 20 years or less, including the equipment’s cost in the year it is placed in service, rather than depreciating it over several years.

How significant are these benefits?

The tax benefits of bonus depreciation can be significant. For example, if a business invests $1 million in warehouse automation in 2023, it can deduct the full amount of $1 million in the year it is placed in service. This can result in a substantial reduction in the business’s taxable income for the year, which can, in turn, lower its tax liability. The tax savings can be used to reinvest in the business, pay down debt, or distribute to shareholders. This rate will start to decline in 2024 and then phase out over the next few years. So, timing is key if you want to maximize your tax savings by investing in warehouse automation.

What other benefits are there to warehouse automation?

In addition to the tax benefits, investing in warehouse automation can provide numerous operational benefits for your business. Warehouse automation can increase productivity by streamlining processes, increasing efficiency, reducing manual labor, improving order accuracy, and increasing inventory management capabilities, thereby saving money in areas such as labor costs and inventory management. With advanced technologies like machine learning and AI, you can also gain valuable insights into your operations and make data-driven decisions that improve your overall supply chain performance.

Can you give me an example?

For example, an automated storage and retrieval system can locate and retrieve products more quickly and accurately than a worker can manually, increasing order fulfillment rates and customer satisfaction. A conveyor system can transport products more efficiently and safely than workers, which can reduce the risk of workplace injuries and accidents. By investing in warehouse automation, businesses can also reduce their dependence on human labor, which can be helpful in times of labor scarcity or economic uncertainty.

What about the upfront costs?

Still, you may be wondering about the upfront costs of automation. While it’s true that significant up-front investments are often required, keep in mind that tax incentives and long-term cost savings can make the ROI more attractive than you might think.

So, what do I do now?

Investing in warehouse automation now can provide great bonus depreciation tax benefits for your business, but it’s also important to consider other factors. Whether you’re looking to cut labor costs, reduce errors, or gain valuable insights into your operations, automation can be a game-changer for your supply chain. By taking advantage of tax incentives and evaluating your options carefully, you can make the most of your investment and position your business for success in the years ahead.

When considering an investment in warehouse automation, you should carefully evaluate your needs and goals. ABCO Systems can assist you and your team in assessing the current and future production requirements, inventory management needs, and workforce capabilities. We will help you understand the costs and benefits of different types of automation solutions, such as the upfront purchase price, maintenance costs, and potential energy savings. Consider consulting with tax advisors to ensure you take full advantage of available tax incentives. ABCO Systems will ensure you get the best equipment to meet your needs. [wpforms id=”6481″]

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