We all know that New Year’s resolutions generally go into effect on January first, but this year we should have more on our minds on the first day of 2014: new IRS regulations that will change the way we account for repairs and other expenses related to tangible property.

In September 2013, the IRS issued its final regulations governing expenditures made on tangible property. The principal expenses covered by these regulations are for costs to acquire, produce, and improve tangible property. The question of whether such expenses should be capitalized (and possibly depreciated) or expensed has long been an issue of contention between the IRS and taxpayers.

Because the earlier temporary regulations for tangible property were issued back in 2011, there has been a lot of time for the IRS to consider if and how they should be revised. You will find these final regulations contain an easing of some of those initial rules, adopt others, and add some new ones. Given an effective date of January 1, 2014, businesses are scrambling to understand them and to ensure compliance. After all, these latest regulations will affect nearly every business that owns fixed assets.

While the effective date for these final regulations is for tax years beginning on or after January 1, taxpayers may, if they choose, apply most of them retroactively to 2012. With careful tax planning, certain taxpayers may find it beneficial to do so.

To read more please read the attached pdf!