Repair vs. Capitalization Review

The IRS issued comprehensive Repair Regulations regarding the deduction and capitalization of expenditures related to tangible property. The regulations are commonly known as the Repair Regulations or the Tangible Property Regulations. The regs are applicable to businesses in all industries that acquire, produce, replace or improve tangible property. Application of the new Repair Regulations requires an in-depth understanding of various tax cases and circumstances that must be met.

Who can benefit from a Repair Regulations Study?
The Repair Regulations mostly affect real property and can provide significant benefits even if a cost segregation study has already been performed. IRS procedures allow you to apply these rules retroactively and claim any missed deductions using Form 3115. Correcting these errors is considered an Automatic Change of Accounting Method and does not require amending any returns.

Generally, anyone that has incurred significant costs for renovations to their existing property in the last 15 years is an ideal candidate. The original improvements should be placed in service for at least one year before renovations occur.