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Retail space users should not overlook this new tax rule

October 25, 2016 Article 1 min read
Mike Carl Plante Moran Cresa
Own or lease retail space? Thinking about renovating? Don't overlook this new tax rule.

Street view with time lapse of people walking in front of stores 

“How was everything today?”

“Just fine, thank you.”

This exchange happens millions of times a day. However, the truth so often lurking under that statement is really, “Your carpet is worn, your décor is so 10 years ago, and the furniture has seen better days.” But rather than complain, most take our retail dollars elsewhere or online, where remodeling a virtual storefront is a low-cost exercise compared to reality.

In today’s ultra-competitive world, the fresh look of your business can impact your consumer foot traffic and sales greatly. In addition to the high costs of time and materials, carrying a capital improvement on the books for years can affect your organization’s bottom line.

To date, the rules regarding business repair expenses and capital improvements were somewhat cloudy. To provide relief and a clearer picture, the IRS has created a safe harbor that provides more certainty around classifying remodel-refresh costs, reduces the administrative burden, and potentially accelerates taxpayer deductions.

If you are renovating to stay attractive, maintain a contemporary environment, or conform to industry standards, 75 percent of that cost could now be expensed immediately. To learn more and see if your retail location and project qualifies, Plante Moran’s Emily Murphy and Sarah Wolters’ article “New Safe Harbor May Allow Accelerated Deductions” is a must-read.

And before you touch the window treatments and signage, give us a call. Plante Moran Cresa has helped many organizations lease, buy, and build the space they need.

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