IRS Regulations on Tangible Property Affect Contractors Thinkstock

IRS Regulations on Tangible Property Affect Contractors

On Sept. 13, 2013, the IRS and the Department of the Treasury issued final regulations on tangible property.

Tax regulations affecting what can be expensed and what must be depreciated are in affect for 2014 filings. On Sept. 13, 2013, the IRS and the Department of the Treasury issued final regulations on tangible property that provide guidance on the tax treatment of costs incurred to acquire, improve or produce tangible property.

Contractor Magazine reported last month about the changes, clarifying what tax regulations even are, and then proceeding to explain "Unit of Property," particularly involving buildings. Tax regulations are official interpretations of the Internal Revenue Code by the Treasury Department, according to the article. They’re supposed to clarify the tax laws.

The Unit of Property for buildings includes each building and its structural components unless the component is a building system (which would include electrical system). This would be separate from the building structure.

How would this negatively affect a contractor? Contractor gives an example and goes on to explain capitalizion vs. deductions.

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