IRS Issues “Repair Regulations,” Multifamily Industry Now Has to Figure Them Out via MHNonline

As of the beginning of the year, there are new federal regulations regarding the tax treatment of costs incurred in acquiring, maintaining and improving tangible property, including multifamily buildings. The Internal Revenue Service (IRS) issued temporary (T.D. 9654) and proposed rules (REG-168745-03) on the matter just before Christmas–and now it’s up to members of the multifamily industry to figure out how they will affect their businesses.

The temporary rules are 255 pages long, contained in a document that also forms the proposed rules as they appear in the Federal Register. A spokesmanfor the National Multi Housing Council told MHN that his organization, like everyone else, had just received the document, and was at work determining how it will affect multifamily property owners.

Broadly speaking, the purpose of the new rules—”repair regulations,” as they’re sometimes called—is to clarify whether expenditures associated with tangible property should be considered capital improvements and depreciated over time or, alternatively, be ordinary and necessary repairs and thus deducted immediately from income. The regulations specify that expenses related to constructing or permanently improving a building, restoring property or converting property to an alternate use, must be depreciated. On the other hand, the new rules will allow taxpayers to deduct the cost of routine maintenance.

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