Heads Up! Property Upgrade Tax Code Changed

April is here and we’ve all got taxes on the brain. Beginning this year, there are new IRS rules that affect how you treat repairs or improvements of your real estate or tangible property. Companies who acquire, maintain, improve or replace tangible property (which is just about everyone) need to be aware of the changes. According to a recent CFO Magazine article on the subject, one key issue is the characterization of upgrades to your property as “repairs” which can be expensed or “improvements” which must be depreciated. Aggressively characterizing items like replacing a roof as a repair instead of an improvement will no longer be allowed. However, additional rules regarding the old roof have been added as well. Instead of continuing that 39 year depreciation period, it can be written off entirely in the year the new roof is installed.

The regulations regarding repairs are wide reaching and can be applied retroactivly so a review of your company’s asset repair or capital improvement plans is in order. Additional rules allowing items with a cost less than $3,000 to be expensed instead of depreciated are also in place. For more information regarding the changes that have taken place, read IRS Sparks Confusion on Property Upgrades and speak to your tax representative.