Repairs vs. Improvements – What Can I Deduct from my Taxes?

Written on February 19, 2014 by , updated on September 27, 2017

Repairs vs ImprovementsHaving to make repairs to my rental properties can be expensive.

Knowing that I am able to deduct this expense from my taxes makes it a little easier to swallow.

The general rule is that the cost of “repairs” incurred to maintain your rental properties may be deducted from each property’s taxable income in a given year. However, some repairs are considered “improvements” in which you’re not allowed to deduct the entire expense immediately.

Repairs vs. improvements, so what’s the difference?



This damaged outlet needs repair

Repairs are usually one-off fixes that help keep the property in good working condition and habitable. Although the price is irrelevant, most of my qualifying repairs tend to be under $500 in cost.

Whether you’re fixing a hole in the wall, or a unclogging a shower drain, you can deduct the cost of these minor repairs from the current year’s tax liability.

The IRS clarifies in the 1040 Schedule E Instructions that “repairs in most cases do not add significant value to the property or extend its life.


An addition is an "improvement"

An addition is an “improvement”

Anything that increases the value of the property or extends its life is categorized as a “capital expense” and must be capitalized and depreciated over multiple years. Meaning, you can only deduct a small but even portion of these expenses in the current tax year.

Improvements, such as replacing a roof or renovating a kitchen, are usually more labor-intensive than repairs and typically cost substantially more.

The good rule of thumb is that if you are adding a new item, or upgrading an existing item, then it’s usually considered an improvement.

The assumption is that these improvements will add value to the property over multiple years, not just the current year – and thus why you can’t deduct the entire $20k kitchen renovation in a single year.

Likewise, when you sell a property, you’ll need to know the costs of these improvements and how much each one has been depreciated because you will have to pay taxes on the depreciated amount. This should be easy to track if you keep accurate records/receipts and copies of tax returns.

Types of Capital Expenses

The IRS uses the following categories to help define a capital expense. You are required to capitalize and depreciate the following:

  • Improvements. You must capitalize any expense you pay to improve your rental property. An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use.
  • Betterments. Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property.
  • Restoration. Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition.
  • Adaptation. Expenses that may be for adaptation include expenses for altering your property to a use that is not consistent with the intended ordinary use of your property when you began renting the property.

Comparison of Repairs and Improvements

Repairing a cracked foundationAdding a structural addition, extra rooms, garage, etc.
Repairing a broken AC fan, replacing damaged/clogged air vent registers or air filtersAdding central air conditioning
Replacing a broken security cameraInstalling a security system
Replacing a small area of carpet that was damaged, or having it professionally cleanedInstalling brand new carpet
Patching a leaky or damaged roofReplacing an entire roof
Replacing a broken plumbing pipe, leaky faucet, or running toiletReplacing all existing plumbing
Replacing an unsafe or improperly run section of electric wire, outlet, or light fixtureReplacing all existing electric wiring
Replacing a broken cabinetRenovating a kitchen
Refinishing or resurfacing the wood floors, or replacing damaged planksReplacing the wood floors
Genenal paintingPainting as part of a larger restoration project or addition
Fixing appliancesReplacing appliances (fridge, stove, washer/dryer)
Replacing a broken door knob Replacing all the door hardware in the house for cosmetic reasons
Replacing a few cracked tilesTiling the entire bathroom floor
Replacing the glass in a window frameReplacing multiple windows (entire house)

Finally, Official Guidance

As of January 1, 2014, the IRS has released official guidance regarding deduction and capitalization of expenditures related to tangible property, which add to and clarify the existing understanding of deductible repairs and depreciable improvements mentioned above.

Examples of Improvements

According to the IRS, the addition or upgrade of the following items must definitively be capitalized and depreciated over multiple years.

Additional Resources

Want to learn more? Check out these articles and forms.

photo credit: Alan Cleaver, Karl Palutke via cc
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138 CommentsLeave a Comment

  • Ryan Smith


    We had a rental property (condo) that was flooded Dec 2015 by an HVAC tech working in the unit above. Our renter was displaced, and did not return. They did repairs to the unit on the front half (walls, carpets, electrical, drywall, and paint). Since they were repairing half and the unit was over 20 years old we opted to have them replace all carpet, paint throughout for a little extra cost. HVAC company covered the repairs with their insurance (over $30K). We also upgraded the kitchen countertop to granite, and added new appliances in the kitchen to sell the unit (another $10K we spent). Some of this was repair and some was upgrade so how do we determine what was capital expenditure. We sold the unit in May 2016. Thanks!

    • J kaster

      Tenant didn’t notify us of a leak in roof and required extensive remodel in order to re rent the house. We opted to improve every thing in the house from paint to new carpet throughout. We are going to sell it. Same scenario as the person with the hvac leak. My question is recapture and capital gains, how to figure and can all cost be written as repairs instead of capital improvements. Also how does capital gains figure into this sale? Thx Jim

  • Anne

    We spent about $10,000 getting our home ready to rent, it included furniture for bedrooms and living room, pots/pans, towels, bikes, things like that, is that deductible as an expense?

    Thank you!

  • Scott Benson

    Hello! I have a four-unit building, and three of the units are rented. Today, I am tuckpointing the building (remove and replace rotting bricks and mortar) on the external walls. $4,500 total. 75% (the rental properties) of that is $3,375. Repair or capital expense? Thanks!

    • Lisa Earnhart CPA

      Hi Scott,
      I would say repair expense. Similar to refinishing or resurfacing a wood floor and replacing some bad planks is an expense, but replacing the floor is capitalized. “Refinishing” the bricks by tuckpointing where necessary an replacing a few bad bricks would be a repair expense, but replacing the brick wall with a new brick wall would be capitalized.

  • Jerome Bennett

    Repairs are definitely a need on anyone’s property. I like how you highlight that they keep the property in good working condition, and that I can deduct it on my taxes. A win-win situation!

  • Zack Alen

    if you have a loss from renting your house can I deduct the loss from my income

  • Wayne kamholz

    Should replacing my front storm door on my house I’m currently living in be sales tax exempt. I bought the door and the store is having it installed I’m paying the store for the door and installation.

  • Brian Wheeler

    I had a ramada (or pergola as it is called elsewhere) on my rental house that reached it’s end of life and needed complete replacement. It was rotted out and could have collapsed at any time. Cost of replacement was about $12,000. Since it what part of the charm of the property and helped me increase the rent, would this be considered a repair or capital improvement?


  • Brian Wheeler

    My furnace in my rental property died of old age.. no parts could be found! I had to replace it, is this a repair or does it need to be considered a capital improvement?


  • Brian Wheeler

    The roof on my rental house finally gave up the ghost.. I was fortunate it lasted so long after it’s expected life. I replaced the entire roof, it needed extensive work as water was pooling and not draining, and starting to leak in various locations thru the house. Repair or improvement?

    • Pam Yi, CPA

      This would be capitalized as a major home improvement (27.5 year life for a residential rental property).

      • Sharon

        Most shingle roofs do not last 27.5 years, more like 20 years. I read somewhere that when refinancing remaining points on an existing loan could all be deducted that year. Would that apply to a roof being depreciated for 27.5 years that needs replaced in 20 years?

        • Pam Yi

          Sharon, in this case you would dispose of the old roof, inputting zero as the sales price. A loss on disposal (sales price of zero less the adjusted basis) would come through on your tax return. It would be a capital loss, though, so depending on your capital gains you may be limited on how much you can claim in that year-unused cap losses carry forward, though. Then you would book the new roof as a new asset with a life of 27.5 years.

  • machel cruz

    I have a rental property I spend 3000 on material and 500 labor cost. Is the labor cost part of home improvement?

    Thank you,


    • Pam Yi, CPA

      Hi Machel,

      Yes, the labor would be added to the material costs, and the total amount would be capitalized (if a rental).

  • Latrice

    I have a property that had an issue with the plumbing. After getting the well pumped out, it still was backing up in the house. We found out that our drain field was not working correctly and needed to be repaired. We paid 7200 to get it replaced while we had tenants. Can I claim this as an expense?

    • Pam Yi

      Hi. If the repair brings the property back to its normal condition, this would be considered a restoration. The $7,200 should be capitalized, which means it should be depreciated over 27.5 years (likely this life – might want to double check the useful life), if a rental property. If your primary residence, you would only be permitted to add it to your cost basis.

  • Susan


    I paid $3100 to replace 7 out of 11 sidewalk blocks that were cracked and uneven in front of my primary residence. Is this a repair or improvement?

    • Pam Yi

      Since it is your primary residence, you would just keep a record of the amount expended. You would add this amount to your cost basis. When you sell the house, the basis number will be used to see if you have a taxable gain.

  • Jessica

    I spent a substantial amount on my rental in 2018, some general repair and some improvement. But the majority of the amount was to repair termite damage. Understand that I can’t claim a casualty loss but my question is whether I should capitalize or expense the cost of termite damage repairs?

  • Steve Moore

    I had an out of state rental property (lived in it years ago, and decided to rent it when I moved). Late December 2017 I evicted the tenants who had stopped paying rent. They destroyed the house. As part of fixing it in January 2018, I decided to totally fix/improve to get maximum resell value and sold the house within 90 days of starting renovations (sold March 2018). All fixes that coincide with improvements must be lumped into the improvement. I sold the home the same year I made the improvements (within the same 90 day window) – how does one depreciate that over 10-20 years when I sold the home that same year? How to I factor in the $127,500 it took to repair all the damage and make improvements to reduce my capital gains?

    • Pam Yi

      Since the major improvements were made when it was no longer a rental, they are not depreciated, but add to the cost basis in the home. When the home is sold, this additional cost basis will reduce the gain on the property.

      • Steve Moore

        Thank you Pam – that makes total sense! I’ve been so used to treating the property as rental income and doing schedule E, etc. that it didn’t really occur to me that since the house was un-rentable/off the market that I should work the taxes for 2018 based on it being a second home.

  • Gloria

    I have a rental property and made about $13k worth of improvements in window shatters , ceiling ferns and backyard. Do we add that to the basis of the home for depreciation?

    We could not get a tenant to lease the house until after 8 months. We paid the mortgage for those 8 months. Can we deduct that loss? My husband and I made taxable income of $170k

    Thank you!

  • Patty

    I bought a home in 2017 to use as a short term vacation rental. The roof inspection stated it was in good shape and should last 10 more years. October 2018 a roof leak was identified. The repair estimate was $1200-2400 depending on what he found when he tore the shingles off. Due to rain (scheduling) issues it could not be repaired until spring 2019. He found much more extensive damage than expected. Total repair bill was $5220. This covered only approximately 25-33% of the roof. An entire new roof was estimated at over $10k. Am I allowed to deduct this whole repair expense since it truly was a repair?

  • Roberto Corbett

    Hi I just bought a duplex and after I realized that the slabs in the basement is giving in and there’s some sinking in the first floor unit throughout the house I would be paying about 8k to jack the rental property up using multiple 20 ton jacks that will be cemented in the basement and also new slabs and joists that will try to level out the house as much as it can. I would like to know if that’s an capital expense that could be write off or just an repair? Thanks

  • William Teppig

    I replaced a broken HVAC unit in my rental. Is this an improvement or repair?

  • Ted Pickenbrock

    I would like to clarify something on start up costs. Before I rented my home there were two items that I had to replace that would normally be an improvement. I had to replace to boiler because it had a CO leak and couldn’t be repaired. In this situation, could it be considered a cost item since I had to replace it and it was before I rented it?
    The other situation was the carpet in the upstairs was unbearable do to the smell from cats. The sub floors had to sealed with special paint because of the odor and the carpet was replaced with new material. This also happened prior to renting it. Any hopes of that expense being a cost and not an improvement?

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