Do you own or rent commercial property?
If so, you should seriously consider making “qualified leasehold improvements” in 2013. This year, you can take a Section 179 deduction¹, if eligible, of up to $250,000, then 50% bonus depreciation² and finally, 15-year depreciation³. For example, if you spent $500,000
- Take the Section 179 deduction of $250,000 first
- Then take $125,00 in bonus depreciation ($500,000-250,000)*50%
- Finally, deduct $4,163 with the IRS’s first year midyear convention using 15-year depreciation.
So in year 2013, you could, if taxable income allows, take a total depreciation expense of $379,163. If you wait until year 2014, your depreciation expense is $12,305 since commercial property will be depreciated over 39 years.
What qualifies as Leasehold Improvement Property?
- Pipe and fittings
- Plumbing fixtures
- Fire protection
- HVAC (heating, ventilation and air conditioning)
- Permanent interior finishes
- Permanent floor coverings
- Millwork and trim
- The improvement must be made under or pursuant to a lease by the lessee (or any sub-lessee) of the interior portion, or by the lessor of that interior portion:
- The interior portion of the building is to be occupied exclusively by the lessee ( or any sub-lessee) of that interior portion; and
- The improvement is placed in service more than 3 years after the date the building was first placed in service by any person.
If you would like to learn more about this tax strategy, please call Susan at 847.895.9880.
¹ IRC Section 179(f).
2 Reg. Section 1.168(k)-1(b)(2)(D).
3 IRC Section 168(e)(3)(E)(iv).