Tax Break for Qualified Restaurant Property
Did you know that some improvements to restaurant property (made during the window period described below) qualify for a favorable depreciation rule that doesn't apply to most other improvements to real property?
Specifically, for building improvements that are “qualified restaurant property” placed in service after October 22, 2004 and before January 1, 2008, depreciation deductions are allowed over a 15-year period. This treatment provides considerable relief from the general rule that depreciation deductions for non-residential buildings, or improvements to the buildings, are allowed over a 39-year period.
To be qualified restaurant property, the building improvements must be placed in service more than three years from the date the building was first placed in service. However, you don't have to be the taxpayer who first placed the building in service. Thus, you are eligible to place qualifying improvements into service even if you haven't owned or leased the building for the entire three years that the building has been in service.
Additionally, to be qualified restaurant property, the building improvements must be made to a building in which more than 50% of the square footage is devoted to preparation of, and seating for on-premises consumption of, prepared meals.
In connection with a restaurant improvement project, I can help you identify improvements that, although attached to the building, are, for depreciation purposes, considered to be machinery or equipment and, thus, qualify for depreciation periods considerably shorter than 15 years.
Contact us if you’d like to take advantage of the tax break for qualified restaurant property.
Notice: To ensure compliance with Treasury Department regulations, we wish to inform you that any tax advice that may be contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.
