Title: Building Improvements Vs. Leasehold Improvements | Finance - Zacks
Headings: Building Improvements Vs. Leasehold Improvements
Building Improvements Vs. Leasehold Improvements
Tip
Assessing Leasehold Improvements
Understanding Building Improvements
Leasehold Improvement Tax Treatment
Building Improvement Tax Treatment
Section 179 Deduction
References
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Content: Assessing Leasehold Improvements
Work that you do on a building for the exclusive benefit of a specific tenant is considered a leasehold improvement. The improvement must be located within the demising walls of the tenant's space and made as a result of requirements in the tenant's lease. Finally, the building must be at least three years old before any improvements can be counted as a leasehold. Understanding Building Improvements
Anything you do to your building that changes its function, increases its value or extends its useful life is an improvement. Renovating the lobby to make it more attractive is an example of an improvement as is replacing all of the building's lighting fixtures with new high-efficiency fixtures. Major repairs that extend the building's life, such as installing a new roof, are also considered improvements. Furthermore, changes that you make on the request of a tenant that are outside of the tenant's space, like renovating a common bathroom, as well as changes that span floors, like installing an elevator or escalator, are also considered building improvements. Leasehold Improvement Tax Treatment
Between 2001 and 2013, the tax treatment for qualified leasehold improvements changed five times. As of the date of publication, you can depreciate the cost of leasehold improvements over 15 years. Because the rules underlying leasehold improvement depreciation are both complicated and ever-changing, talk to your accountant to find how the current state of the law and how it will affect you.