New 2014 Tax Rules Affecting Commercial Real Estate Owners
DENVER, Feb. 18, 2015 /PRNewswire/ -- In anticipation of the 2014 tax filing season, commercial property owners should be aware that the federal government has made significant changes to tax rules that govern how businesses treat payments made to purchase, repair, or maintain real property and other tangible assets.
According to a recent article by Hein & Associates LLP, these new rules will require many businesses to change their tax accounting methods before filing 2014 income tax returns. Some aspects of the rules apply to tax years before 2014. Any business that reported amounts for depreciation, repairs, or materials and supplies related to tangible assets on tax returns prior to 2014 will almost certainly be affected by the retroactive changes.
The article also states that those businesses will need to analyze prior year payments in order to calculate the correct basis for tangible assets and the correct amounts for related expenses based on the new rules. The process of filing the tax accounting method change includes a one-time adjustment to bring all of the prior year changes in asset costs and expenses into compliance with the method that the government now requires. These adjustments must be made before 2014 tax depreciation is calculated in order to make sure that asset values and related expenses are determined in compliance with the latest guidance.
The guidance doesn't really change the way that depreciation is calculated on buildings or other assets—it changes the way some payments related to the assets are treated. The retroactive provisions in the new rules can result in the reclassification of payments that were classified correctly under the old rules in prior years as expenses or adjustments to basis. Software that calculates tax depreciation on assets will generate incorrect amounts for businesses that fail to analyze prior year information and make the proper adjustments. Businesses who rely on that software will still need to review prior year payments for fixed assets and repairs to assure compliance under the new regulations.
To learn the benefits of the new tax rules and the consequences of not filing the proper changes, read the full Hein & Associates LLP article. Hein & Associates also offers a Tangible Asset & Repairs Study, including a comprehensive analysis of the impact that new regulations may have on a particular business.
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SOURCE Hein & Associates LLP
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