Repair and Maintenance 263(a)

The purpose of a 263(a) Study or a Repair and Maintenance (R&M) Study is to analyze the taxpayers business operations, determine the appropriate “Units of Property” for the purpose of capitalization and depreciation and identify routine repair and maintenance expenditures that may have been capitalized and depreciated incorrectly.

An R&M Study is a little-known tax strategy which involves giving opportunities for taxpayers to expense certain costs that traditionally have been capitalized. Several recent court cases have produced laws that provide more clearly defined guidance for classifying certain construction costs as “repair and maintenance” rather than fixed asset costs. A thorough understanding of the various tax case laws and “tests” that must be met is necessary to claim and reclassify these immediate expenses. Comprehensive documentation is also essential to withstand the scrutiny of an IRS audit that could be triggered by claiming these expenses. The current laws can be applied to all current and future tax years, as well as items that were put into service as many as 5 years ago. 

What Types of Repairs Qualify?

  • Replacing windows and doors
  • Replacing lighting, electrical and plumbing
  • Painting (interior or exterior)
  • Replacing wall coverings
  • Resurfacing interior or exterior floors
  • Resurfacing parking lots
  • Rekeying locks
  • Replacing sidewalks and parking lots
  • Repairing plaster walls or ceilings

Other Related Services

  • Cost Segregation Study
  • Reserve Study
  • EPAct 179D Tax Deduction

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