Leasehold Improvement


DEFINITION of 'Leasehold Improvement'

Alterations made to rental premises in order to customize it for the specific needs of a tenant. Leasehold improvements include painting, installing partitions, changing the flooring, putting in customized light fixtures and so on. Leasehold improvements can either be undertaken by landlords, who may offer to do so to increase the marketability of their rental units, or by the tenants themselves.

Also known as tenant improvements.


Loading the player...

BREAKING DOWN 'Leasehold Improvement'

Temporary leasehold improvements undertaken by tenants can be removed at the end of the lease period, as long as it is stipulated in the lease agreement, and removal would not inflict any damage on the rental premises or building structure.

A leasehold improvement is classified as an asset that can be depreciated by the landlord over time. While the useful economic life of most leasehold improvements is 5 to 10 years, until 2004, the Internal Revenue Code required that depreciation for such improvements occur over the economic life of the building, or 39 years. Tax legislation enacted in 2004 reduced this depreciation period to 15 years; however, the 15-year depreciation schedule is temporary in nature and must be reauthorized annually.

  1. Internal Revenue Code - IRC

    The comprehensive set of tax laws created by the Internat Revenue ...
  2. Leveraged Lease

    A lease agreement that is partially financed by the lessor through ...
  3. Synthetic Lease

    An operating lease that is structured in a way so that it is ...
  4. Lease

    A legal document outlining the terms under which one party agrees ...
  5. Lessor

    The owner of an asset that is leased under an agreement to the ...
  6. Lessee

    The person who rents land or property from a lessor. The lessee ...
Related Articles
  1. Economics

    What is a Leasehold Improvement?

    A leasehold improvement is an alteration made to a rented space that customizes the space for the tenant.
  2. Retirement

    Should You Buy Property On Leased Land?

    Find out what to consider before investing in a leased-land property.
  3. Home & Auto

    Tips For The Prospective Landlord

    Investing in rental property can generate serious income, but there's more to it than collecting rent.
  4. Home & Auto

    Rental Properties: Cash Cow Or Money Pit?

    Create a valuation system to forecast the profitability of an income-producing property.
  5. Taxes

    Tax Deductions For Rental Property Owners

    Besides creating ongoing income and capital appreciation, real estate provides deductions that can reduce the income tax on your profits.
  6. Entrepreneurship

    Top 10 Features Of a Profitable Rental Property

    Find out which factors you should weigh when searching for income-producing real estate.
  7. Home & Auto

    4 Ways To Value A Real Estate Rental Property

    Real estate rentals can be a profitable alternative to the buy-and-sell approach if investors know how to make accurate valuations.
  8. Economics

    Who is a Lessor?

    A lessor is the owner of an asset that is leased.
  9. Economics

    How Does a Modified Gross Lease Work?

    A modified gross lease is a rental agreement where, in addition to their rent, tenants pay a share of other costs associated with the property.
  10. Investing

    Buying Your First Investment Property? Top 10 Tips

    Check this list if you are thinking of making a purchase and becoming a landlord.
  1. What are examples of typical leasehold improvements?

    Typical leasehold improvements include partitioning a large, open space into smaller, more structured areas such as dressing ... Read Full Answer >>
  2. What is the process for a building owner depreciating leasehold improvements in a ...

    As long as the building owner is the person or entity that provides leasehold improvements, then the owner can depreciate ... Read Full Answer >>
  3. How long can a building owner or landlord depreciate a leasehold improvement?

    Leasehold improvements have different depreciation rules depending on whether you are working with U.S. tax basis financial ... Read Full Answer >>
  4. What key requirements must be met for the IRS to classify changes or alterations ...

    Qualified leasehold improvement refers to improvement that is done to the interior of a non-residential building by a person ... Read Full Answer >>
  5. Does renters insurance cover storage units?

    An all-perils renters insurance policy provides coverage for the contents of storage units. Most policies limit the amount ... Read Full Answer >>
  6. Does renters insurance cover mold?

    An all-perils renters insurance policy typically provides a low set amount of coverage for damage caused by mold as long ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center