Is your company facing the need to “remediate” or clean up environmental contamination? If so, the money you spend for you environmental cleanup expense can be deductible on your tax return as ordinary and necessary for business. Of course, you want to claim the maximum immediate income tax benefits possible for the expenses you incur.
These expenses may include:
Unfortunately, every type of environmental cleanup expense cannot be currently deducted. Some cleanup costs must be capitalized. But, generally, cleanup costs are currently deductible to the extent they cover:
On the other hand, environmental cleanup expenses generally have to be capitalized if the remediation:
However, parts of these types of remediation costs may qualify for a current deduction. It depends on the facts and circumstances of your situation. For example, in one case, the IRS requires a taxpayer to capitalize the costs of surveying for contamination various sites proving the contamination. However, they allow a current deduction for the costs of surveying the sites for proof of the un-contamination.
In addition to federal tax deductions, there may be state or local tax incentives involved in cleaning up contaminated property. The tax treatment for the expenses can be complex. If you have environmental cleanup expenses, we can help plan your efforts to maximize the deductions available.