Posted on February 23, 2005 at 16:51:00:
Before a company starts construction, while a building is still in the planning stages, tax considerations can cut building costs by speeding up depreciation deductions.
Consider the basics: commercial real estate must be depreciated over 39 years; other building components can be written off over five to seven years. Even some land improvements—landscaping and parking lots—qualify for a 15-year depreciation schedule.
The key, then, is to “unbundled” the construction project, even in some cases to have two building contracts: one for the base building, the other for any “impermanent” components.
For instance, pre-manufactured products like moveable shelves instead of built-ins and partitions instead of walls—items not structural components of the building—can be depreciated sooner.
Relocatable furniture, such as cabinets and lighting fixtures, gets better tax treatment than permanent elements.