Title: GAAP Accounting for Capital Improvements | Bizfluent
Headings: GAAP Accounting for Capital Improvements
GAAP Accounting for Capital Improvements
TL;DR (Too Long; Didn't Read)
Fixed Assets and Useful Life
Repair vs. Capital Improvement in GAAP
Expense and Improvement Bookkeeping
Improvements to Land
Depreciating Capital Improvements
Setting the Cap Limit
Case by Case
Must I Use GAAP?
Capital Improvements and Taxes
Section 179
Bonus Depreciation
Tax Depreciation of Improvements

Content: Whether you write off a $2,000 building repair or depreciate it over 10 years affects the profits and your assets shown on your statements, but it doesn't let you pay the contractor's bill any later. Taxes are a different kettle of fish. Whatever you deduct as an expense gives you an immediate reduction in your taxable income. Items you depreciate give you a recurring tax deduction over several years. You might want to expense a capital improvement upfront as an immediate deduction, but it's not always possible. If you depreciate a capitalized improvement under GAAP accounting, you do it straight line, depreciating the same amount each year until the asset's useful life runs out. Under IRS rules, you have several methods for claiming depreciation as a business deduction: Section 179
Bonus depreciation
Regular depreciation
Accelerated depreciation
Section 179
Section 179 allows you to claim the entire cost of a qualifying capital improvement as an expense for the year you made the purchase. You can claim up to $1 million in improvements and purchases, although there are some limits on the deduction that lowers that ceiling. The IRS exempts some building improvements from Section 179.