The Tangible Property Regulations

materials and supplies

How do the Final Tangibles Regulations Change Deducting Materials and Supplies?

Generally, the final tangibles regulations don’t change the rules for deducting materials and supplies. The final tangibles regulations use existing court cases to decide on the exact definition and treatment of materials and supplies but added some safe harbors to provide clarification. Unfortunately, clarification from the IRS can sometimes just further confuse everyone. Materials and …

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How to Fully Take Advantage of the De minimis Safe Harbor

De minimis Safe Harbor: An Administrative Convenience for the Service and the Taxpayer The Tangible Property Regulations under §263a provide three safe harbors designed to help small and large taxpayers avoid the Regulations’ complex and sometimes confusing nuances. These Regulations determine whether expenditures spent on assets currently in service must be expensed or capitalized.  The …

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Frequently Asked Questions Regarding Capitalization Versus Expense

What you should know about the Tangible Property Regulations 1. What exactly are the tangible property regulations? §162 of the Internal Revenue Code allows you to deduct all the standard and necessary expenses you experience during the taxable year. This includes the costs of materials and supplies, repairs, and general maintenance. The opposite of §162 …

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What is a Negative 481a Adjustment, and How Do I Get One?

When a tax method change occurs, whether it is from cost segregation, the Tangible Property Regulations, or any other tax method changes (for which the cutoff method cannot be used), a 481a adjustment must be used. Suppose income for any taxable year is under a different method of accounting from the method used in the …

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The Most Overlooked Tax Savings Opportunity for Building and Residential Rental Owners

Routine Maintenance Safe Harbor Building owners! Under the Tangible Property Regulations, passed in 2014, you are not required to capitalize as an improvement or betterment, which means you can expense amounts that meet the following criteria: Amounts paid for recurring activities which keep the property in its ordinarily efficient operating condition, AND you reasonably expect …

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How do I Decide Whether to Expense or Depreciate Expenditures on my Building?

Have the Tangible Property Regulations changed the rules for determining whether an expenditure is a deductible repair or a capital improvement? The Tangible Property Regulations put existing case law and prior tax regulations into a structure to help you determine whether an expenditure is deductible or must be capitalized because it’s a major improvement, restoration, …

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What is a Unit of Property?

The Unit of Property (UOP) concept is not new, but the rules are new to The Tangible Property Regulations under § 1.263(a). In the past, the regulations did not define property for the purposes of determining whether an expenditure after an asset is placed into service adds value to the property, extends the useful life …

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Building for Routine Maintenance Safe Harbor

Routine Maintenance Safe Harbor

The Routine Maintenance Safe Harbor is one of the most overlooked safe harbors within the mandatory Tangible Property Regulations under §263a (1-3). If you are cost-segregating a property, you can assume your cost segregation firm has never heard of the Routine Maintenance Safe Harbor. The reason is the majority of cost segregation firms, especially the …

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Small Taxpayer Safe Harbor

The Tangible Property Regulations include a Safe Harbor for small taxpayers. This safe harbor is an excellent opportunity for (among others) single-family residential rentals, apartment complexes, and student housing. This Safe Harbor, within the Tangible Property Regulations (under §263a), allows all expenditures under the lesser of $10,000 or two percent (2%) of the unadjusted basis …

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Building Demolition

Demolishing Your Building? You Need to Read This.  Now.

When investors and building owners purchase a building that may need to be totally gutted soon, they are disheartened to learn that they will lose all future depreciation deductions related to the building. This Regulation is under §280B. §280B states that if a building is being demolished and more than 25 percent of the walls …

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