Repairs & Improvements

The cost of repairs to a rental property may be deducted as a current expense. The cost of improvements must be recovered by taking depreciation. Whether an expenditure qualifies as a currently deductible repair, or is required to be capitalized, is a factual determination. The taxpayer bears the burden of proof and must have sufficient records to substantiate the expense as a deduction instead of a capital expenditure.

Repairs	Improvements
Costs that: • Keep the property in good operating condition, • Do not materially add value to the property, or • Do not substantially prolong the property’s life.	Costs that: • Add to the value of the property, • Prolong the property’s useful life, or • Adapt the property to new uses.
Deductible as a current expense.	Must be capitalized and depreciated.
Examples: • Repainting inside or out. • Fixing gutters. • Fixing damaged carpet. • Fixing leaks. • Plastering. • Replacing broken windows.	Examples: • Room additions. • Remodeling. • Landscaping. • New roof. • Security system. • Replacing gravel driveway with concrete.
Example: Ashlyn’s rental property has damage to a small section on one corner of the roof. If she fixes only that small portion of the roof, she can deduct the cost of the repair as a rental expense. However, if she replaces the entire roof, the new roof is an improvement because it increases the value and lengthens the life of the property. She would depreciate the cost of the new roof.

Please feel free to reach out to us if you have any questions about repairs and improvements on your rental or personal properties.