There’s nothing fun about removing mold…but now it is tax deductible!
In welcome news for taxpayers affected by the sometimes devastating cost of a mold condition in a structure, IRS has privately ruled that the business cost a taxpayer incurred on a project to remove mold from a building it owned and leased out was deductible as an ordinary and necessary expense under Code Sec. 162.
Environmental clean up expenses.
Generally, repairs are deductible as an ordinary and necessary trade or business expense under Code Sec. 162 if they merely keep the property in an ordinary, efficient operating condition. But expenses must be capitalized if they’re needed to place the property in an ordinarily efficient operating condition (as in the case of expenses to remedy a condition that existed when the property was acquired), or if they add to the property’s value, substantially prolongs its useful life, or adapt it to a new or different use. (Code Sec. 263(a), Reg. § 1.263(a)-1(b), Reg. § 1.162-4) These rules also apply for environmental cleanup costs. (Rev Rule 94-38, 1994-1 CB 35)
Source: Federal Taxes Weekly Alert (preview) 02/23/2006, Volume 52, No. 08