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Old 01-14-2014, 07:10 PM
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Leasheold improvments and business personal property tax

Hi,
I have a business in Maryland and we spent a significant amount of money to remodel our space before we could use it. When I filed federal taxes for 2011 I deducted our leasehold improvements as an asset. For personal property tax, I read that leasehold improvements applies when "the lessee retians ownership of the leasehold improvements, or is required to remove them at the end of the lease". According to this, then leasehold improvements would not be taxable in my situation. So my question is, is it possible that under Federal taxes I deduct my leasehold improvements as an asset but for personal property tax they are not taxable? Thanks for the reply



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Old 01-15-2014, 01:55 AM
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Originally Posted by ChrisNZ View Post
So my question is, is it possible that under Federal taxes I deduct my leasehold improvements as an asset but for personal property tax they are not taxable? Thanks for the reply

Leasehold improvements are assets, and they may be depreciated. Prior to 2004, any substantial improvements were depreciated over 39 years. Thirty-nine years is the IRS-designated useful life of a building being leased. The useful life of leasehold improvements is 5 to 10 years. This is also the average commercial-lease term .In 2004, legislation was introduced to reduce the period of depreciation of improvements from 39 years to 15. This allowed landlords to modernize their buildings every 15 years instead of every 39, and to write off 2 1/2 times the rate of depreciation.so, qualified leasehold improvement property , generally nonresidential interior improvements made pursuant to a lease , is eligible for special tax treatment that allows the taxpayer to deduct 50 percent of the cost of the improvements in the year the property is placed in service. The remainder of the property's cost can be amortized over a 15-year period. If the cost of the leasehold improvements was financed according to a loan, you also must include the interest paid under that loan as part of the capitalized basis. Leasehold improvements generally revert to the ownership of the landlord upon termination of the lease, unless the tenant can remove them without damaging the leased property. However, if not, nothing that was installed over the term of the lease can be considered permanent, since it will have to be removed if the tenant moves. This fact means that the work performed cannot qualify as a capital improvement. In some states, the personal property tax only applies to businesses. In those states, the personal property is anything that can be removed from the business without damage to it. For example, you can't remove the walls of the business, so those aren't taxed under personal property. But you could take out the office furniture, which is something that many states do tax.you can check it with your state.



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Old 01-15-2014, 04:24 PM
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Thank you for your reply!



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