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Old 03-21-2017, 10:05 AM
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LittleScholars LittleScholars is online now
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Default Fixture vs. Improvement?

I had one accountant prep my taxes and we had another accountant review them. Any advice on which to follow?

Situation: We did a $27,000 home improvement that is, for now, strictly for daycare (exclusive-use full basement renovation). One day our children could, in theory, use the daycare space as a playroom, but we only have a 10 week old and it will be many years before he's ready to access the space independently as a playroom.

Account 1 Recommendation: Depreciate the entire total over 39.5 years.

Account 2 Recommendation: "We should look for more of the basement improvement total to be listed as a fixture vs an improvement. The fixture is anything that is not part of the wall. So the lighting definitely, maybe cabinets, mirror, sinks, toilet, etc. The fixture amounts can go 7 years."

Obviously, #2 would be more beneficial this tax season, but we also want to avoid any issues should we get audited.

Thanks!
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Old 03-21-2017, 10:26 AM
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TomCopeland TomCopeland is online now
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Default home improvement

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Originally Posted by LittleScholars View Post
I had one accountant prep my taxes and we had another accountant review them. Any advice on which to follow?

Situation: We did a $27,000 home improvement that is, for now, strictly for daycare (exclusive-use full basement renovation). One day our children could, in theory, use the daycare space as a playroom, but we only have a 10 week old and it will be many years before he's ready to access the space independently as a playroom.

Account 1 Recommendation: Depreciate the entire total over 39.5 years.

Account 2 Recommendation: "We should look for more of the basement improvement total to be listed as a fixture vs an improvement. The fixture is anything that is not part of the wall. So the lighting definitely, maybe cabinets, mirror, sinks, toilet, etc. The fixture amounts can go 7 years."

Obviously, #2 would be more beneficial this tax season, but we also want to avoid any issues should we get audited.

Thanks!
There's no simple answer. In general, you lump together all expenses when doing a major remodeling and treat as one expense you depreciate over 39 years. To take out fixtures and treat them as 7 year property is taking an assertive position. I'd take the conservative position and depreciate everything over 39 years.
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