The IRS lets you deduct ordinary and necessary expenses required to manage, conserve, or maintain property that you rent to others. A repair is anything that puts the property back into the same condition it was in originally. Capital improvements that add to the value of your rental property, prolong its life, or adapt it to new uses must be depreciated over a period of time rather than deducted as a current-year expense. This would include things like:
- Remodels and room additions (including decks and porches)
- New or upgraded landscaping, irrigation, sprinkler system
- Hardscape such as pavement, block or retaining wall, patio
- Fencing
- Swimming pool, spa
- Storm windows, doors
- New roof
- Central vacuum or security system
- Upgraded wiring, plumbing, duct work
- Central heating, AC, humidifier
- New furnace, water heater
- Filtration, soft-water, or septic system
- Built-in appliances
- New flooring or wall-to-wall carpeting
- Upgraded insulation
- Satellite dish
In other words, if you spent $8,000 on a new roof last year, the IRS won't let you deduct the entire $8,000 from last year's rental income. Instead, the $8,000 must be depreciated, which means you deduct it over a period of time instead of all at once. If you have large repair expenditures, take photos and keep detailed records to back your position of reporting an expense that may be a deemed an improvement.
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