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Do tenant improvement allowances count as taxable income?

Generally, yes* - when tenant improvement allowances are given, the amounts are netted with the associated tenant improvement expenses incurred.  For example, if you get a $100,000 tenant improvement allowance, and you spend all $100,000 on improvements, then you net zero and this is not a taxable event. 

On the other hand, if you receive an allowance of $100,000 and do not spend all of it on tenant improvements in the calendar year it was received, then yes, it is taxed as other income. However, if you use the allowance received in another year, the allowance becomes deductible in that year.

*each situation is unique - please consult and confirm with a certified tax professional.

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