IRSFinal Rule
Interest Capitalization Requirements for Improvements that Constitute Designated Property
Finance & BankingHousing
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Summary
This IRS rule clarifies when businesses must add interest costs to the value of long-term property improvements rather than deducting them immediately as expenses. The regulation affects how companies account for construction and upgrades to buildings and similar assets, potentially changing their tax bills.
Key Points
- 1Businesses must capitalize (add to asset value) interest costs during construction or improvement of certain long-term property instead of claiming them as immediate tax deductions
- 2The rule applies to 'designated property' including buildings, land improvements, and other assets that take substantial time to construct or prepare for use
- 3Companies must track interest costs separately during construction periods and add them to the property's basis, affecting depreciation deductions over time
- 4The regulation impacts real estate developers, manufacturers, and other businesses that finance long-term capital projects
- 5This change may reduce current-year tax deductions for affected companies but could alter the timing and amount of tax benefits over the asset's useful life
Key Dates
Published
October 2, 2025
This summary is for informational purposes only. It may not capture all nuances of the regulation. Always refer to the official text for authoritative information.
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