Adverse Effects of New Tax Law
A drafting error has been discovered in the new tax law that may adversely affect retailers and restaurant owners planning improvements. Under the new tax law, the tax burden for building improvements has increased.
Tax reform has improved the way a business can write off investments instead of depreciating them on a yearly basis. The language in the tax reform act did not specify property improvements.
Depreciation Over 39 Years
Because of the current language businesses would typically have to write off the cost of renovations over 39 years. The old tax code period was just 15 years. This extended period of time will never allow a business to recover the cost of their investment and new renovations or improvements will be required before a business recovers their original investment.
New Measures Needed
Hopefully, Congress will pass measures to correct this oversight in the tax law and extend the 100% bonus depreciation to property renovations. Otherwise, the new rules will remain more restrictive than the previous tax code as far as property improvements are concerned.
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