According to the IRS:
The final tangibles regulations synthesize existing case law and prior administrative rules into a framework to help you determine whether a cost is deductible as a repair and maintenance expense or must be capitalized because it's an improvement. If the amounts are not paid or incurred for an improvement to tangible property as determined under the final tangibles regulations, then the amounts generally are deductible as repairs and maintenance.
A unit of tangible property is improved only if the amounts paid are:
- For a betterment to the unit of property; or
- To restore the unit of property; or
- To adapt the unit of property to a new or different use.
The safe harbor elections mean you don't have to determine if the cost is for a repair or an improvement. That doesn't mean you have to capitalize the cost of a repair because it exceeds the safe harbor amount. If it doesn't qualify as an improvement, it is a repair and maintenance expense. It does require an analysis of the facts and circumstances.
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