“There’s Extra Tax When You Sell
Qualified Improvement
Property (QIP)”
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Do you own, or are you just thinking of owning, an office building. Or perhaps a store, a warehouse, or a factory building?
If you are, there’s every chance you’re thinking
of making improvements to the interior of your
building.
If you do make improvements to the interior, and the tax law classifies your improvements as qualified improvement property (QIP), that’s when the fun begins.
A quick look at QIPs.
Technically, QIP means any improvement made to an interior portion of a non-residential building (think offices, stores, factories, etc.) that is placed in service after the date the building is placed in service.
A big change in depreciation.
Before the Tax Reform Act of 1986 (notably, in 1981, when 15-year real property depreciation existed), you could depreciate your commercial real estate using the straight-line method and suffer no recapture. Great.
This allowed your depreciation to turn into long-term
capital gain when you sold the property — a huge benefit.
Today, that commercial building can suffer some type of depreciation recapture tax on all its depreciation.
And that same ugly recapture applies in one form or another to QIP. Not so great. In fact, a pity.
Welcome to the world of QIP complexity.
Frankly, the rules that govern QIPs are extraordinarily complex. This means I can’t explain everything in this short email.
But you do need to know this information which I explain in detail in my new article. Want to find out more?
CLICK HERE to read my completely new article titled:
“There’s Extra Tax When You Sell
Qualified Improvement
Property (QIP)”