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: 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. Building Improvement Tax Treatment
The IRS requires you to depreciate a building improvement over the same time frame that you depreciate your building. Commercial real estate buildings typically have a 39-year life, so it can take a while to recoup the cost of building improvements. With this in mind, if it's possible to classify an improvement as a repair or as a leasehold improvement, you'll achieve more tax savings in the near term. Section 179 Deduction
Don’t forget about the Section 179 Deduction. This deduction was intended for small businesses.