Guide for rental owners
Repair or improvement: what landlords can deduct right away
Fixing a leak and replacing a roof aren't deducted the same way.
Not everything you spend on a rental is deducted the same way. Repairs are deducted in full the year you pay. Improvements are usually depreciated over several years. Knowing the difference puts you in charge of the conversation with your CPA.
Repairs keep things working
A repair puts something back the way it was, or keeps it in ordinary working order: fixing a leak, patching drywall, replacing a broken latch, servicing the furnace.
Improvements make it better, bigger or new
An improvement makes the property better than it was, restores something major, or adapts it to a new use: a new roof, a remodeled kitchen, a new water heater or HVAC system, an added room.
| Usually a repair | Usually an improvement |
|---|---|
| Fixing a leaking pipe | Replacing all the plumbing |
| Patching a few roof shingles | Replacing the roof |
| Repainting between tenants | Adding a room or a deck |
| Fixing a broken dishwasher | Buying a new dishwasher |
Three safe harbors that help
- De minimis safe harbor: items of $2,500 or less (per item or invoice) can be deducted right away. More on how it works.
- Routine maintenance: recurring work you expect to do more than once in 10 years to keep the building in working order can be deducted, even when it's significant.
- Small taxpayer safe harbor: if your building cost $1 million or less, your total repairs and improvements on it for the year can be deducted when they stay within the lesser of $10,000 or 2% of what you paid for it.
Why it matters
A $1,450 fridge depreciated over 5 years saves about $93 in tax the first year. Expensed under the de minimis safe harbor, it saves about $464 this year (at a 32% rate).
Tethered Properties does this for you
Type what you bought in everyday words, and Tethered Properties tells you whether it's usually a repair or an improvement, shows both choices side by side when you have one, and flags the call for your CPA.
This guide is general information for rental owners, not tax advice. Tax rules change and every situation is different; your CPA or tax advisor knows your full picture. Figures are estimates.