Rental - Can I deduct an improvement as an expense or does it have to depreciate??

[catngo]

I have a lot of questions about what's considered an improvement (I) or an expense (E). The following is a list of projects I completed in 2021 and would like to know if my categorization of them is correct or not.

- Replaced a window (I?)

- Painted the interior of one unit (E?)

- Painted building's exterior and landscaping (I? The purpose was to freshen it up for putting on the market to sell.)

- Replaced a staircase and painted the area (I?)

- Replaced a vanity, light, and heater fan (I?)

Most of the above projects did not exceed $2500 though.  Even for those that are improvements, can I still deduct them  as an expense rather than enter as depreciation? If they need to be depreciated, will they be categorized as land improvements?

[ee-ea]

See this from the IRS

https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations

[DanP0428 · Accepted solution]

Improvements are things like adding a room or replacing a roof.  Everything on your list is an expense with possible exclusion of the staircase.  

[PattiF]

Items that can be expenses for the tax year include: replace a window, paint interior of one unit, and paint the staircase.

Items to be depreciated are: paint the exterior of the building and landscaping, replace a staircase, and replace vanity, light, and heater fan.

Here is a TurboTax Help article with more information about capital improvements and depreciation for a rental unit. This IRS FAQs discusses expense versus depreciation.

When the property is sold, all of the unused depreciation will be taken as an expense in the year of the sale.

[ColeenD3]

There are two elections afforded by the IRS. The first is the de minimus safe harbor, but there is also an improvements election. If you meet the qualifications, you can expense them.

Improvements Election

This election is an option you can take each year that lets you write off some building improvements as expenses instead of assets.

Here are the rules you need to meet to take this election:

• Your gross receipts, including all your other income, are $10,000,000 or less.
• Your eligible building has an unadjusted basis of $1,000,000 or less.
• The cost of all repairs, maintenance and improvements is less than or equal to the smallest of these limits: 
  • 2% of the unadjusted basis of your building or
  • $10,000

This election for building improvements is called the Safe Harbor Election for Small Taxpayers. If you decide to take this option, a form called Safe Harbor Election for Small Taxpayers will show up in your tax return. This election will apply to all your businesses, rental properties or farms.