For a Carvel franchise, how long can building improvements be depreciated, assuming the useful life of the building exceeds 20 years?

According to Carvel's 2025 Franchise Disclosure Document, building improvements can be depreciated for a specific period. If the useful life of the building is longer than 20 years, the building improvements can be depreciated for up to 20 years. This means that even if the building itself will last much longer, the franchisee can only write off the cost of improvements over a maximum of 20 years for tax purposes.

This depreciation timeline affects how a Carvel franchisee accounts for their expenses and profits. By depreciating building improvements, the franchisee can reduce their taxable income each year, spreading the cost of the improvements over time. However, the 20-year limit means that the franchisee cannot continue to deduct these expenses indefinitely, even if the improvements continue to be useful beyond that period.

For a prospective Carvel franchisee, understanding these depreciation rules is crucial for financial planning. It helps in accurately projecting expenses and taxable income, which in turn aids in making informed investment decisions. Franchisees should consult with a tax professional to fully understand the implications of these depreciation rules and how they apply to their specific situation.