Capitalization vs. Expensing

Posted on Feb 28, 2014

The new IRS regulations on capitalization vs expensing are complex. But the part of the regulations that concerns most small businesses makes it easier for them to comply.

Here’s an overview of the safe harbor rules for small businesses. If your average annual gross sales are $10 million or less, you may choose to write off the cost of improvements made to an “eligible building.” An “eligible building” is one that is owned or leased by the qualifying taxpayer and the unadjusted basis of the building is $1,000,000 or less. Also, to be able to deduct the expenditures on your current-year’s tax return, the yearly total paid for repairs, maintenance, and improvements cannot exceed the lesser of $10,000 or 2% of the building’s unadjusted basis.

As with any part of the tax law, there are many details to be followed for the best tax treatment. Please contact us if you would like more information on these new tax regulations.

Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in the McLean and Tysons Corner, VA. Gilliland & Associates specializes known for our superior knowledge and aggressive interpretation and application of tax laws, we help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+ <https://plus.google.com/108764776146415485651/posts> , LinkedIn <http://www.linkedin.com/in/gillilandcpa> , Facebook <https://www.facebook.com/gillilandcpa> , and Twitter <https://twitter.com/dnggcpa>

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