Benchmark Group

Tax Relief for In-Store Remodels and Improvements

Retailers are often hesitant to do a full store remodel or even to improve some sections of their stores because of the cost.  They know they must have the budget to cover more than just the materials and the time it will take—they also have to cover the after-tax costs, costs that are often much more than anticipated.  These costs often force retailers to delay making much-needed improvements or overall remodels.  While many retailers used to do a full remodel every five to seven years on average, today many are not updating until the ten-year mark or even later.  This leads to outdated layouts and even a loss of business if competitors update more quickly.

Tax Incentives

However, there are two pieces of legislation being considered that would make permanent tax incentives for remodeling or improving a store.  These bills do not create new tax incentives.  Instead, they would make two temporary measures an ongoing part of tax law.  Both bills have passed the Ways and Means Committee of the House of Representatives.

The Restaurant and Retail Jobs and Growth Act

This act deals with a measure that permits what’s called bonus depreciation.  It would change the amount of time retailers can write off the cost of their remodels or improvements.  The standard amount of time is 39 years, but under this act, retailers could write off the costs over a period of 15 years instead, allowing them to take larger deductions each year.

Capital Investments and Deductions

The second bill under consideration deals with immediate deduction.  When a business makes a capital improvement, they may immediately deduct half of the cost of that improvement.  The rest of the cost can then be depreciated over the remaining period of time.  The current temporary provision applies only to leased stores, but if approved, this Act would expand the deduction to include stores owned by retailers.

The Original Provisions

Originally, both of these provisions were introduced as temporary measures to help businesses stay afloat after the recent recession, and both expired on January 31, 2014.  However, if these bills pass, the provisions will be retroactively applied to any capital improvements or remodels made during 2015.

Why are these Deductions Important?

Many retailers and business experts see these two bills as vital to helping aging businesses remain competitive without risking bankruptcy to finance new improvements.  Because they can deduct half of the costs of all capital improvements in the tax year they are made, they will be able to focus more on making the best improvements possible.  With the ability to spread the depreciation across a smaller time frame, they also won’t have to worry as much about burdening future budgets with tax commitments.

Let Us Help

Our team has experience with Remodels addressing finish, fixture and equipment upgrades, improved customer shopping experiences, more efficient operational flow, and larger renovations that include space planning.

If you are considering remodeling or improving your store, let Benchmark Group help.  Our remodel experts can assist you in determining what parts of your building need improvement and if a full remodel is necessary.  If you are ready to start planning your store’s new look, contact us today!