Tenant construction allowances are a common detail in commercial real estate leases. Because landlords need tenants to fill their commercial spaces, and tenants need to customize these spaces for their business, a tenant allowance is a vital lease term which significantly pushes forward and finalizes a commercial real estate leasing transaction. An allowance must be structured accordingly to avoid undesired tax consequences.
I.R.C. § 110 provides landlords and tenants with a safe harbor which ensures that a tenant is not required to recognize income for a tenant allowance in leases which are for 15 years or less of a retail space. Otherwise, the tenant treats a tenant allowance received from the landlord as ordinary income, while depreciating assets over their useful life, typically resulting in much more income than expenses.
This is the ninth part of our series of blogs on the most overlooked tax deductions. In this blog, we will attempt to summarize the second half or group of prior articles in the series. For a more a detailed overview, see the blogs themselves!
HEALTH, CHILD CARE, AND CHARITY DEDUCTIONS
Deduction of Medicare Premiums for the Self-Employed
Self-employed individuals who continue to operate their own businesses after qualifying for Medicare can deduct their Medicare Part B and Medicare Part D premiums, plus the cost of supplemental Medicare policies or the cost of a Medicare Advantage plan, regardless of whether or not he or she itemizes.