repairs or improvements

Forum|Forum|6 years ago
March 13, 2020
3 replies
37 views

Hello

The fine line between expenses and improvements probably was discussed countless times. Nethertheless wanted to double check with expert opinions:

-New AC unit due to older units compressor failure and being a fire hazard. Since no more older Freon units are available was forced to buy and replace a new unit with the new refrigerant

-Deck rotten joist and wood repairs. The deck was attached to the house. The deck joists looked rotten and perhaps a hazard to the tenants. Only parts of the original deck was repaired and reinforced. No additions were made.

-French drain redo/repair due to water leaking in the basement during heavy rains. It seemed the older drain failed. Still the new drain needed additional waterproofing inside to completely block the moisture. Do I divide the project into inside and outside waterproofing?

What about the miles traveled for repair, vs improvement purposes? are they treated the same for the year?

Tax Advice

Opus 17

Level 15

One definition of an improvement is that it extends the useful life of the property or one of its subsystems. Replacing the air conditioner extends the life of the HVAC system, and reworking the French drain and foundation waterproofing extends the life of the foundation. I would consider those both to be improvements and I would not think that you should split the interior and exterior waterproofing since they are both part of improving the foundation. Because the deck work was targeted to specific areas, I would consider that more along the lines of a repair.

If you are traveling to maintain your rental property and to supervise work being done, I would not think you would have to capitalize and depreciate your mileage as part of the cost of an improvement. I think any travel you do to maintain your property is an expense.

bobRburg

Level 2

Sorry, I believe those are all maintenance/repair category. Consider that those items could have been counted as CAP IMP one time before, and can't be repeated. Feel free to inquire further.

Opus 17

Level 15

@bobRburg wrote:

Sorry, I believe those are all maintenance/repair category. Consider that those items could have been counted as CAP IMP one time before, and can't be repeated. Feel free to inquire further.

Why can't you make capital improvements more than once? If you own a property long term, you might well have to replace the roof or air conditioner more than once over 20 or 30 or 40 years.

If you only want to ask someone who will tell you what you want to hear, ask your office or fishing buddies. Replacing a compressor because it can no longer be repaired is an improvement, since it extends the working life of the HVAC system. And there's a difference between patching a crack in the foundation and trenching out the whole house to replace a failed French drain.

bigbunny101Author

Level 2

Thanks all. It seems to me that any big ticket item can be argued into an improvement by the IRS. Why take chances. Even a 2k deck repair over a relatively large deck, has some bias to it, as it does extend the life of the structure but is rather immaterial to the structure as a whole.

AnnetteB6

Level 15

I will add one more opinion to the mix. I agree with Champion Opus 17 that only the deck work would be considered a repair. Had the entire deck been replaced, then it would have been an improvement.

Additionally, all of your miles related to maintaining the property are treated the same.

@bigbunny101

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