Can You Write Off Construction Costs?
Writing off construction costs depends on the nature of the work and how the property is used. Both the IRS and CRA have specific rules on when and how these costs can be deducted.
In the US, most construction costs for buildings or significant renovations are considered capital expenses, which are not immediately deductible. Instead, they must be capitalized and depreciated over a set period.
In Canada, most construction expenses for business properties are capitalized and deducted gradually through Capital Cost Allowance, similar to depreciation. Buildings typically fall under Class 1, with a 4% annual CCA rate.
Writing off construction costs is like planting a tree; you don’t get a shade immediately, but over time, it pays off.
