Final IRS Regulations Address Capitalization vs. Expensing

This past fall, the IRS released its long-awaited final regulations on the tax treatment of expenditures related to tangible property. So contractors and other business owners finally have some answers to the “deduct or capitalize” quandary. This article discusses a couple of safe harbors to the capitalization requirement; the tests that are used to determine whether an expense should be capitalized; and replacement of the former ceiling on expensed amounts with a new safe harbor determined at the invoice or item level. A sidebar looks at key changes to rules covering materials and supplies.

Read the full article in the Winter issue of On-Site.