Tax law grants an immediate deduction for repairs, but requires that you capitalize and depreciate improvements and betterments.
For tax purposes, the financial difference between a repair and a capital expenditure is huge. You deduct the repair immediately, which puts tax money in your pocket immediately.
Unlike the immediate repair deduction, the capital expenditure on a business building does damage to your cash in two ways:
You get your write-offs on a straight-line basis over 39 years (think time value of money here).
To the extent of gain on sale, you pay a depreciation recapture tax of up to 25% on the depreciation deductions you claimed (here, think in terms of a loan that ... Log in to view full article.