Businesses of all sizes and owners of rental properties have long been able to deduct certain expenses related to repairs and maintenance of all of their equipment and properties. IRS regulations for these deductions went into effect in 2014, with a new set of regulations that implemented some clearer rules about how maintenance and repair expenses should be deducted on business taxes.
If you make any repairs that improve your equipment, bring a property back to its standard condition or adapt that property to a new use, the expense can be depreciated on taxes over the course of several years. Any repairs or maintenance costs that cannot be categorized as restorations, adaptations or betterments can be deducted in full the same year they are paid for.
However, recent changes to Section 179 tax codes give business owners a greater ability to deduct these costs immediately.
The longstanding rules for repair vs. maintenance
Any repairs or maintenance done to tangible pieces of property can have their costs deducted immediately if those amounts paid are not required to be capitalized. Therefore, when considering expenses and potential deductions, the question business and property owners must ask is whether that expense needs to be capitalized.
The IRS does have some clarification about the differences between repairs and maintenance. According to Publication 535, Business Expenses, the cost of repairs to property used in a business or trade is either a capital or deductible expense. Regular maintenance that keeps property working efficiently but does not increase the value of that property is deductible in the same year the maintenance is paid for—all other repairs and maintenance are capitalized and depreciated over several years.
So, regular quarterly furnace maintenance, for example, would be a deductible expense. However, the installation of a new furnace would be a capitalized expense. Another example is a business vehicle—oil changes and tune-ups would be deductible expenses, but replacing the transmission or another major system in the vehicle would be a capitalized expense, as it prolongs the vehicle’s useful life.
A repair to your roof, then, would be an example of a capitalized expense under the longstanding system.
New rules for immediate deduction
New rules for 2018, however, have changed the game. Now, with the new Section 179 deduction rules implemented for this year, building owners can immediately write off up to $1 million for money they spend on repairs that would typically be considered capitalized expenses.
This means a new roof, new equipment and anything else that expands the value or the useful life of certain elements of your property would be able to get you some deductions much faster than in previous years.
It is highly recommended you work with an accountant to be sure you are completely up to date on the latest business tax rules and how you can benefit from these deductions. You can also contact Stubbs Roofing, Inc. to learn more about commercial roof repair in Salt Lake City, UT. We look forward to working with you!
Categorised in: Commercial Roof Repair
This post was written by Writer