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IRS eases rules for capital improvements

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in Small Business Tax,Small Business Tax Deduction Strategies

Q. My business partner says an important new ruling was issued on deducting the cost of certain capital improvements. Do you know what he is talking about? J.J., Lodi, N.J.

A. We think he’s referring to Revenue Procedure 2015-20 reflecting recent regulations on the federal income tax treatment of capital improvements and repairs. Under the ruling, for the first tax year beginning on or after Jan. 1, 2014, a small business taxpayer can make accounting method changes to comply with the regulations without filing Form 3115, Application for Change in Accounting Method. This is good news because filling out Form 3115 is a big pain and may require expensive professional assistance. A “small business taxpayer” is a business with total assets of less than $10 million or average annual gross receipts of $10 million or less for the three prior tax years.

Tip: These rules are complex, so consult with your tax pro.

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