Taking tax shortcut on building improvements — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

Taking tax shortcut on building improvements

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Q. My business shares a warehouse with other tenants. We have five years remaining on our lease, but the building has 14 years left to be fully depreciated. If I expand my part of the building, do I depreciate the cost over 14 years instead of five? B.B., Cleveland

A. Neither. An improvement to business property is treated as if the property was placed in service for the first time. Therefore, you must depreciate the cost of the improvement over 31.5 years. It doesn’t matter how long the term of the lease is or how many years remain before the building is fully depreciated. Tip: Certain components of business buildings may be depreciated over a shorter time. Check with your tax pro.

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