Title: Repair or Improvement? Know the Tax Rules—Critical difference for owners of business buildings - Lewis & Knopf, CPAs, P.C.
Headings: Repair or Improvement? Know the Tax Rules—Critical difference for owners of business buildings
Repair or Improvement? Know the Tax Rules—Critical difference for owners of business buildings
Content: Generally, the term includes items such as painting and wallpapering, repairing leaks in a roof, patching up cracks in a floor, or replacing a worn out or broken component of an air conditioning system. Improvements: Replacing an old roof with an entirely new one clearly is an improvement that must be capitalized and depreciated. So is the cost of renovating an entire structure, remodeling a building to suit a different purpose, or reconditioning or rebuilding a piece of machinery. Be aware that there are several tax pitfalls in this area. For instance, a business owner who decides to renovate, remodel or expand a building will often make necessary repairs at the same time. While this makes a good deal of economic sense, it could be a bad idea from a tax viewpoint. Reason: The IRS might argue that the repairs are part of the general betterment or renovation plan. In that case, the entire cost—including the repairs portion—must be capitalized.