The repair versus improvement rules for asset purchases can drive large dollar differences on small business and rental returns. In this session, we’ll apply the tangible property regulations to common real-world situations, with an emphasis on practical classification and documentation. We’ll cover how to evaluate whether costs must be capitalized or can be deducted, and how safe harbors can simplify the decision-making process. We’ll also discuss repeat problem areas such as roofs, HVAC, flooring, remodels and turnover work on rentals, so we can build a consistent approach across clients.
Objectives
Upon completion of this session, you will be able to:
Apply the tangible property regulations framework to determine whether an expenditure is a repair expense or an improvement that must be capitalized
Identify the appropriate unit of property for common small business and residential rental assets
Apply relevant safe harbors and elections for eligible taxpayers and properties
Determine how to treat capitalized improvements for depreciation purposes, including recovery periods and placed-in-service considerations
