The guidance includes final regulations for eliminating the associated property rule and related provisions for interest capitalisation on improvements to designated property.
The US Treasury and the Internal Revenue Service (IRS) have released final regulations on Interest Capitalisation Requirements for Improvements That Constitute Designated Property, published in the Federal Register on 2 October 2025.
This document contains final regulations that, with regard to the interest capitalisation requirements for improvements constituting designated property, remove the associated property rule and similar rules from the existing regulations.
In addition, this document contains final regulations that modify the definition of “improvement” for purposes of applying those existing regulations.
It also contains final regulations that modify other rules in those existing regulations in light of the removal of the associated property rule.
The final regulations affect taxpayers making improvements to real or tangible personal property that constitute the production of designated property.
These regulations are effective starting 2 October 2025.
