What Are the Treatments for Leasehold Improvements?
Building an additional room or partition in leased space could be considered a leasehold improvement. new interior 4 image by Paul Moore from Fotolia.com A leasehold (or tenant) improvement is a tangible build-out or structural change to the interior of leased non-residential real estate made by a lessee to suit his needs. These improvements can be capitalized and depreciated by the lessee if the improvements meet certain guidelines. What May Be Capitalized A leasehold improvement can be nearly any tangible build-out made in leased space. Items such as interior partitions, room build-outs, floor finishes, carpeting and lighting fixtures may be capitalized. These capitalized improvements must be made in a part of the building that is used exclusively by the lessee and placed into service at least three years after the building’s construction. What May Not Be Capitalized Certain types of build-outs are not allowed to be capitalized as leasehold improvements. The lessee may not capitalize
