Tangible Property Safe Harbors Help Maximize Deductions
last year your business made repairs to tangible property,
such as buildings, machinery, equipment or vehicles, you may
be eligible for a valuable deduction on your 2016 income tax
But you must make sure they were
truly "repairs," and not actually "improvements."
Why? Costs incurred to improve tangible property must be
depreciated over a period of years. But costs incurred on
incidental repairs and maintenance can be expensed and
In general, a cost that results in an improvement to a
building structure or any of its building systems (for
example, the plumbing or electrical system) or to other
tangible property must be capitalized. An improvement occurs
if there was a betterment, restoration or adaptation of the
unit of property.
the "betterment test," you generally must capitalize amounts
paid for work that is reasonably expected to materially
increase the productivity, efficiency, strength, quality or
output of a unit of property or that is a material addition to
a unit of property.
the "restoration test," you generally must capitalize amounts
paid to replace a part (or combination of parts) that is a
major component or a significant portion of the physical
structure of a unit of property.
the "adaptation test," you generally must capitalize amounts
paid to adapt a unit of property to a new or different use —
one that isn't consistent with your ordinary use of the unit
of property at the time you originally placed it in service.
2 Safe Harbors
Distinguishing between repairs and improvements can be
difficult, but a couple of IRS safe harbors can help:
Routine maintenance safe harbor. Recurring activities
dedicated to keeping property in efficient operating condition
can be expensed. These are activities that your business
reasonably expects to perform more than once during the
property's "class life," as defined by the IRS.
Amounts incurred for activities outside the safe harbor don't
necessarily have to be capitalized, though. These amounts are
subject to analysis under the general rules for improvements.
Small business safe harbor. For buildings that initially
cost $1 million or less, qualified small businesses may elect
to deduct the lesser of $10,000 or 2% of the unadjusted basis
of the property for repairs, maintenance, improvements and
similar activities each year. A qualified small business is
generally one with gross receipts of $10 million or less.
There is also a de minimis safe harbor as well as an exemption
for materials and supplies up to a certain threshold. Contact
us for details on these safe harbors and exemptions and other
ways to maximize your tangible property deductions. Call us at
SMEED CPA Adds Financial
Services To Help Clients With
Investments & Insurance
often we here at SMEED CPA are asked about financial issues
that impact our clients investments and their portfolios.
We always offered our opinion and suggestions but in order to
help our clients actually execute the changes we suggest,
SMEED has created a Financial Services division.
SMEED Financial Services, Inc. will be able to
work with both individual and business clients on their
investment portfolios and manage assets on their behalf.
SMEED Financial will include Michael Uadiale,
ACA, CPA, CGMA; and Pablo Blanco who has
recently joined SMEED and comes with over 18 years of
financial sales and advising experience with affluent
Watch your inbox and mail boxes for more specific information
on services SMEED Financial Services, Inc will make available
Would You Give Me Your
Feedback & Testimonial
on Our Hotline?
Hello it’s Michael Uadiale, CPA of
SMEED CPA Inc. We’ve just installed a toll-free
number that I would like for you to call and tell me how you
think we are doing as your CPA firm.
Just dial 800-609-9006
extension 3638 and follow the instructions. If we’ve
done a good job please let me know. And if we can
improve on anything, please mention that too.
Us Be Found on
Also as we expand our business,
we find more and more people are using
YELP and Google
to look for us by searching Brentwood accountant or
When they do this we want to
be FOUND on GOOGLE. One way you can help us
is to give us an
ONLINE REVIEW on our Google Maps/Places listing --->
or on our YELP local listing
click here to go to our Google Listing for SMEED CPA and
click on the
YELP link to go there.
Scroll down to the Review area.
On either site it may say: Been here?
Rate and review
You will click on the Rate and
review link and then log in, then
give us a review!
You can choose between 1 and 5
STARS and write in what you think about the tax or accounting
work we have done for you.
It's that simple. Thank
you in advance for your help and cooperation!
As always you can call our offices if you have any
questions about these or any other accounting related issues at
Regards, Michael Uadiale, CPA,
Managing Partner, SMEED CPA,