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Tax Deductions for Real Property Improvements

March 01, 2011

Michael Jodon, CPA, CVA

There is an interesting new federal tax benefit available for those who own small businesses.  Section 179 of the Internal Revenue Code has been substantially widened regarding expensing for 2010 and 2011 tax returns, and it now includes deductions for Qualified Real Property Improvements.

This could mean good news for people who own restaurants, retail businesses or make non-residential lease improvements, and who either have made these improvements in the past year or plan to make them this year.  This is a concerted effort by the federal government to spur investments in real property during this time period.

This now means that improvements made to actual real property – including floors, ceilings, walls, fixtures and stairs – may potentially be currently deducted, up to a maximum of $250,000.  This opportunity is only available for a limited time and the property must meet IRS requirements.

As an example, let's say a restaurant owner decides to renovate his dining room. If done in 2010 or 2011, qualified improvements to the physical property mentioned above – new floors, new walls, re-done ceilings, etc. – may potentially be marked as a current tax deduction.  This provides a unique opportunity for business or property owners to make improvements that they perhaps were putting off to a later date.

Property owners should consult a tax professional as there are specific definitions and requirements that must be met to take advantage of this new opportunity. However, it could mean that major improvements are more affordable now than ever before.

Michael Jodon, CPA, CVA, is a partner with BlumShapiro, New England's largest regional accounting, tax and business consulting firm based in Connecticut, with offices in West Hartford, Shelton and Westport, CT and Rockland, MA. The firm serves as business advisors for today's leading middle market companies, non-profit organizations and government entities, working to strategically tailor and consistently deliver tested solutions for unlocking an organization's full potential. For more information about BlumShapiro, visit


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