The new law has an impact on many aspects of tax filings this year. The decision to capitalize certain expenses that were deducted in prior years is a decision that may have more of a tax impact for 2018.
With the $10,000 state and local tax deduction limitation, and the elimination of the two percent miscellaneous itemized deductions, it may be beneficial to capitalize interest, taxes and other carrying charges into the cost of real property.
If you have undeveloped land, you may elect to capitalize mortgage interest, real estate taxes and other carrying costs.
If you have improved real estate, such as investment homes, personal residences, second homes or rental properties, and that property is currently under development, you may choose to capitalize various otherwise deductible (or formerly deductible) costs. Please note, this does not apply to improved real estate that is currently in use and not undergoing development or construction.
The details of this application can be complex and we are here to help you. If you think you might benefit from this approach or you have questions, please reach out to our tax experts, Jim Hutcherson or Rich Busofsky. We’re here to help you keep as much of your hard earned money as possible and to maximize the tax laws to your benefit.