Get Pub 862

Repairs vs Capital Improvements Such items are reported as operating expenses and are not capitalized. Examples are: replacement or repair of floor covering or roofs, reconditioning by replacing small parts, painting, or regular maintenance costs.

A capital improvement is a durable upgrade, adaptation, or enhancement of a property that increases its value, often involving a structural change or restoration. The IRS grants special tax treatment to qualified capital improvements, distinguishing them from ordinary repairs.

However, generally, if you plan on redoing your floors - as opposed to doing a repair - that project becomes a capital improvement project. That means that refinishing your basement and adding a Luxury Vinyl Tile floor or even carpet is a good thing, as is redoing a bathroom.

Generally, we require replacements of major building components to be capitalized and recovered via either use allowance or depreciation expense. Major building components such as HVAC systems are in use for many years, and the costs should be amortized over the useful life.

Examples of capital expenditures include a new roof, appliance or flooring. A capital expenditure could also include installing a new heating and air conditioning system or doing a major overhaul of an existing HVAC system. The same goes for extensive new plumbing or major electrical work.

Better known as capital expenditures or improvements, these can include big-deal undertakings like carpet replacement, major lighting or landscape projects, pool deck refurbishment, security system upgrades or replacements, exterior painting, painting of garages, stairways or hallways, and many more.

A repair keeps your rental property in good operating condition but does not materially add to its value, substantially prolong its useful life, or make it more useful. It's well settled that replacing an entire carpet in a rental property is an improvement, not a repair.