Support Beam Repair

[mgc6288]

I have a rental property where my contractor discovered the support beam is twisted.  The foundation company will be replacing the failing piers that are currently holding up the support beam and re-anchor them.

The cost of the project is $5400.  

Is this considered a repair, and if so, is the entire $5400 deductible in the year it was spent?  

[M-MTax]

If it's treated as a repair then it's deductible in the year you paid for it.

[M-MTax]

This could be viewed as an improvement though

[mgc6288]

I've heard both ways and reading the historical forum comments also suggests either direction.

I had the option of replacing the support beam but chose to keep the current one by contractor's opinion.  So the support beam itself is the same.

The current piers are damaged, and because of their damage, the beam has started to twist.  So we are replacing the current piers and then straightening out the beam.  

I imagine foundation work doesn't normally add value to a property like a new roof can so my presumption is that it isn't an improvement.  A roof has an expected life span whereas foundation either works or it doesn't.  

My opinion is a repair where I can deduct the entire $5400 the same year this is done.  Depreciating during high levels of economic inflation seem to reduce the value of the deduction over time so I'd rather take the expense now than wonder how much I really did "save" with my $200 deduction 10 years from now, let alone in 25 years.

[Opus 17]

An improvement, or betterment, extends the useful life of the property or one of its systems, or adds value to the property.  A repair restores the property to as-is or as-was condition.   Classical improvements are things like a new roof, replacement windows, or remodeling the kitchen.  Classical repairs are things like painting, or fixing a hole the roof (without replacing the whole thing) or replacing broken kitchen cabinet doors with matching doors because of tenant damage.

I think this situation could be argued either way.  On one hand, it's probably a long term problem that happened over time, and the work is needed to keep the property standing; on the other hand, you aren't remediating the entire foundation, just selected elements that have failed.  I think you can take it either way.  

[M-MTax]

My opinion is a repair where I can deduct the entire $5400 the same year this is done.

Just my opinion but that's they way I'd handle it if were up to me. It might be one thing if the expense were tens of thousands of dollars, but for $5400 I'd just deduct it immediately as a repair.

[mgc6288]

Now this situation has gotten even more interesting.  We went to install today and discovered historical termite damage in the support beam.  So we decided to replace with a steel beam.  

Is replacing a bad wooden support beam with a steel beam now considered an improvement?  It is arguable that this doesn't add any value to the property.  I cannot add the additional and expect someone to pay because of it.  A functional support beam is presumed.

The cost is now $9400 so can I still write this off in full as a 2024 repair or do I now have to depreciate this over 27.5 years?  Thanks.

[M-MTax]

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@mgc6288 wrote:

The cost is now $9400 so can I still write this off in full as a 2024 repair or do I now have to depreciate this over 27.5 years?

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Again, it is nothing more than my opinion, but I believe you can go either way in this scenario. 

Be prepared to back up your argument in the unlikely event it attracts attention.

[mgc6288]

The argument I'd make is there are two support beams parallel to each other where he main support beam is still fine but this one, the shorter one, is damaged by termites and needs to be replaced.  I'll definitely go repair and write it off in one year as it just doesn't make sense to write off over 27.5 years.  The value of the dollar today will be far less valuable.  Five years?  Maybe, but inflation needs to be taken into consideration when dealing with depreciation write-offs.

I was just concerned that since I'm replacing the wooden beam now with a steel beam if that is considered an "improvement" even though just a smarter repair job given the situation.  This isn't a remodel or addition to the building.  Thanks for your continued response.

[M-MTax]

it just doesn't make sense to write off over 27.5 years. 

Yep, agreed......never does with that low of a dollar amount.

[Opus 17]

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@M-MTax wrote:

it just doesn't make sense to write off over 27.5 years. 

Yep, agreed......never does with that low of a dollar amount.

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Unfortunately, the IRS doesn't give you a break on dollar amount (except for the $2500 safe harbor, which you have exceeded).  It depends on the scope of the work.  Your new update doesn't really change my view that this could be argued as either a repair or an improvement (repair, because you are restoring just a portion of the foundation system, not reconstructing the entire foundation such as after an earthquake or major water damage).  I think you are fine taking it as a repair.