improvements to a leased biz space

[Jeff D.]

I lease a retail space. First year. I put about 20k into remodeling the space this past year. What's the best way to account for that expense on taxes? It's commecial, and I don't own the space, just the biz in the space. Does it work just like a residential real estate where a large remodel to your house is a capital improvement that increases your basis and gets depreciated? Or is it one big one-time write off?

[Account Closed]

This would be considered a leasehold improvement. There are some significant tax incentives in 2011 for leasehold improvements it may be possible that you can elect to write off the entire cost in year one.

The cost of a leasehold improvement does have to be capitalized so in that sense it similar to other classes of property. The life of a lease was the length of your lease term also considering options to extend your lease. Effective Jan 1st though of 2012 leasehold are treated differently and will be reviewing the new treatment when tax season is done.