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: Here’s a rule of thumb: An improvement is work that prolongs the life of the property, enhances its value or adapts it to a different use. On the other hand, a repair merely keeps property in efficient operating condition. Let’s take a quick look at a few examples. Repairs: 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.