Fix in stimulus law gives tax benefits to real estate owners

Commercial real estate owners can now get big tax benefits, thanks to a fix of a glitch from 2017 contained in the economic stimulus measure passed in late March.

A provision in the new law fixed a typo in the 2017 Tax Cuts and Jobs Act, which was intended to allow certain real estate businesses and retailers to write off the costs of certain property improvements right away, instead of over time. However, due to a typo, the 2017 measure accidentally failed to have the intended effect.

Under the law known as the CARES Act, real estate owners can now write off the costs of Qualified Improvement Property (QIP) in the first year in which the improvements are made. This is called “bonus depreciation,” as opposed to spreading out the write-off over the useful life of the improvements.  Prior to the passing of the new law, the Internal Revenue Code stated that most improvements on QIP could be written off only over a period of 39 years. Under the Code, QIP is any improvement to an interior portion of non-residential building, as long as the improvement is placed in service any time after the building itself was first operational.

The CARES Act also removed a $500,000 limit on the amount of business losses a tax payer can deduct from their taxes on non-business income.

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