Carmina
Carmina, when it comes to taxes, talking about repairs versus improvements can be tricky.
The cost of repairs made by your business is currently deductible. However, the cost of improvements must be capitalized and written off over time via depreciation deductions.
What To Do:
Separate repairs from improvements when work is done on the building. For example, don't lump standard repairs with a major renovation. If that occurs, it will take longer to write off the cost of the repairs. It is up to you to show that renovation expenses should be deducted currently instead of being capitalized.
Sometimes it's hard to tell the difference between a repair and an improvement. If you're having trouble telling the difference, remember these rules:
- A repair keeps the property in good operating condition.
- An improvement extends the useful life of the property.
- If the cost of the work amounts to 25% or more of the original cost, it will probably be classified as an improvement.
If you have any other questions, please let me know.
Larry Kopsa CPA
