Have you remodeled your retail facility or restaurant since January 1, 2014? Or do you intend to undertake such a project in the near future for such a facility? If so, and if you have an audited financial statement, a simplified procedure may be available to you to automatically deduct up to 75% of these costs.
Effective for tax years beginning on or after January 1, 2014, certain retailers and restaurants can elect a safe harbor methodology under Rev. Proc. 2015-56 to automatically deduct 75% of the cost of remodeling expenses incurred during the tax year (25% gets capitalized). Prior to this procedure, the only way for taxpayers to deduct these types of costs was to analyze in detail the specific facts and circumstances in order to determine where on the spectrum of cosmetic refresh (deductible) versus structural remodel (required to be capitalized) these costs fell and to treat them accordingly. While the detail facts and circumstances approach may in some cases provide for greater total deduction (up to 100% of costs incurred), the simplified method discussed here may still be preferred for its relative ease of application or if detail analysis indicates the refresh / remodel project may otherwise be required to be capitalized (absent the simplified method).
Qualifying taxpayers are those with audited financial statements in the retail (NAICS codes beginning with 44 or 45 excluding auto dealers, gas stations, mobile home dealers, and non-store retailers) or restaurant (NAICS codes beginning with 722 excluding caterers, hotels, casinos, amusement parks, and theaters) industries. Landlords with audited financial statements who lease qualified buildings to these types of businesses may also qualify.
Certain additional restrictions and requirements may apply.
If you have a retail or restaurant business with audited financial statements and have a project that you think may qualify for the above simplified treatment to deduct 75% of the associated costs, please contact your RubinBrown advisor for additional details and consultation.
Any federal tax advice contained in this communication (including any attachments): (i) is intended for your use only; (ii) is based on the accuracy and completeness of the facts you have provided us; and (iii) may not be relied upon to avoid penalties.
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