Question

Alicia owns depreciable real property that needed extensive repairs and maintenance this year. She is in a lower tax bracket this year than she expects to be in future years. Which option would likely provide the best opportunity to defer deductions until later tax years?

The election to capitalize repairs and maintenance.

The safe harbor election for a small taxpayer with an eligible building.

The Section 179 deduction.

The de minimis safe harbor election.

Answer 1

Alicia owns depreciable property. She is going to invest further in the property for repairs. This will increase the value of property. If she claims deduction under sec 179, she will get 100% deduction in the this year itself which will not benefit her. Thus she wants to defer deductions of this property.

The best option here is to capitalize repairs and maintenance and then claim depreciation in further years.

Note - The safe harbour election and De Minis Safe Harbour Election is for rental building. (Not Owned Building)