Business & farm

Under the new law the leasehold improvements are Nonresidential Real Property.

Qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property are no longer separately defined and no longer have a 15-year recovery period under the new law. These changes apply to property placed in service in taxable years beginning after Dec. 31, 2017.

Qualified improvement property.

Generally, this is any improvement to an interior part of a building that is nonresidential real property, and the improvement is section 1250 property and is placed in service by you after 2017 and after the date the building was first placed in service by any person.

However, a qualified improvement does not include any improvement for which the expenditure is attributable to any of the following.

• The enlargement of the building.

• Any elevator or escalator.

• The internal structural framework of the building.

Nonresidential real property. This is section 1250 property, such as an office building, store, or warehouse, that is neither residential rental property nor property with a class life of less than 27.5 years.

A taxpayer may elect to expense the cost of any section 179 property and deduct it in the year the property is placed in service. The new law increased the maximum deduction from $500,000 to $1 million. It also increased the phase-out threshold from $2 million to $2.5 million. For taxable years beginning after 2018, these amounts of $1 million and $2.5 million will be adjusted for inflation.

The new law also expands the definition of section 179 property to allow the taxpayer to elect to include the following improvements made to nonresidential real property after the date when the property was first placed in service:

• Qualified improvement property, which means any improvement to a building’s interior. However, improvements do not qualify if they are attributable to:
  • the enlargement of the building,
  • any elevator or escalator or
  • the internal structural framework of the building.
• Roofs, HVAC, fire protection systems, alarm systems and security systems.

IRS Publication 946, How To Depreciate Property