Effective for tax years beginning on or after January 1, 2014, the final tangible property regulations mandate sweeping changes for amounts paid to acquire, produce, or improve tangible property. These complex regulations will impact virtually all taxpayers for the upcoming filing of calendar year 2014 income tax returns.
These regulations come after years of taxpayer uncertainty as to whether expenditures are repairs (expensed in the current year) or capitalized improvements (depreciated over time). Now, under new regulations the taxpayer is provided a general framework for distinguishing capital expenditures from deductible supply, repair and maintenance costs via the Betterment, Adaptations, and/or Restorations (‘BAR’) standards. In addition, the regulations provide further clarity for the tax treatment of materials and supplies, rotable parts, and temporary spare parts.