Owning a building comes with a lot of upkeep headaches. Roofs, HVAC units, lighting systems—they all break down and require replacement eventually.
And until recently, the tax consequences of such renovation projects added insult to injury. Once you replaced, say, a roof, you were stuck capitalizing and depreciating the new roof—and you continued to depreciate the old one.
But if today you’re thinking about replacing a roof or other structural component in a building, we have some great news. Under new IRS rules, you can claim a tax deduction equal to the remaining basis (undepreciated cost) of that component you replaced.
That sounds good, right? Well, it gets even better.
By getting that old component off your books, you also save thousands of dollars in recapture taxes when you sell the building! That means you add to your bottom line twice.
All you need to do to double-dip on the tax savings is
make some calculations to break the building into separate components, and
make the easy-as-pie election. ... Log in to view full article.