Before you can close the books on 2014, you will need to take a
closer look at the new IRS regulations that deal with the question
of whether a repair is allowed to be reported as an expense and
deducted currently, or whether you are required to capitalize the
cost of improvements and depreciate the cost over a number of
years. Because restaurants are frequently replacing aged equipment
or undergoing remodeling, this is a question you face repeatedly.
Effective January 1, 2014, the IRS – in their quest to
simplify the decision process – has issued new standards
which impact the restaurant industry (as well as other
industries).
Improvements
Before the new regulations were issued, you deducted your
current year costs and then capitalized those improvements
identified as having been made to the building in which your
restaurant is located. Under the new rules, every building (or
piece of equipment) – including its structural
components – is considered a single unit
