The United States Internal Revenue Service (IRS) generally does not allow office renovation expenses to be amortized during the renovation period. Instead, such costs must be capitalized and depreciated over the property's useful life, typically 15–39 years for non-residential real estate under Modified Accelerated Cost Recovery System (MACRS). During active renovation, businesses cannot immediately deduct these expenses; they must wait until the improvements are completed and the property is placed in service.

The IRS distinguishes between repairs (expensed immediately) and improvements (capitalized). Renovations that enhance property value, extend its lifespan, or add new features qualify as capital improvements. For example, installing energy-efficient HVAC systems or structural changes requires depreciation over the asset's useful life. IRS Publication 527 explicitly states that "improvements" must be depreciated, not amortized during the renovation phase. A 2021 study by the National Association of Realtors (NAR) found that office renovation costs average $50,000–$150,000 per project, with larger spaces exceeding $300,000. Depreciating these amounts over 15 years reduces annual deductions to approximately $3,333–$10,000, significantly lowering taxable income compared to immediate expensing. However, businesses may claim depreciation once the property is operational, provided they maintain proper documentation. This approach ensures compliance with tax code requirements while optimizing long-term financial benefits.