Movable Fixtures Allow Real Estate Tax Flexibility

Mike Moser, a CPA and partner with Beall Barclay & Co. PLC of Rogers and Fort Smith, said installing movable fixtures rather than permanent ones in commercial buildings can greatly accelerate the recovery of their costs.

That’s because the Internal Revenue Service views permanent fixtures such as interior walls, for example, as part of the actual real estate.

IRS codes require a 39-year depreciable life for buildings. But if, for instance, movable partitions are used instead of real walls, the firm could depreciate that cost over a mere seven years. The tax law changed in 1999 to make the technique available.

Free-standing book shelves instead of ones that are built-in, freestanding cabinets for wash basins and suspended ceilings or hand-tightened plumbing fixtures — if installed correctly — can also be considered movable fixtures.

“It can save tremendous tax dollars by going through any time you build a building to make sure that you separate the different components into the right class lives to maximize your depreciation exposure,” Moser said.

Several code sections are involved, and consumers should consult a tax specialist before implementing advanced tax strategies.

But in basic form, the rule would give a $10,000 permanent fixture a 39-year depreciation rate of $256 for the first year. But if the fixture was movable, it could be deducted over seven years at $1,429 per year.

In this particular case, however, anything under $24,000 can be taken as a one-time deduction or divided out over seven years — so the entire $10,000 could be written off right away.