When doing your taxes, how do you differentiate between “repairs” and “improvements”? Repairs are expensed vs. improvements are depreciated, and sometimes things are obvious but other times a bit gray. A roof that is simply worn out would typically be depreciated. How about if a tree fell on the roof and you had to pay a $3,000 deductible? What about a water leak that caused you to replace flooring?

Look up the de minimus safe harbor election.

With this election many items which would normally be depreciated can be expensed.

Also under the new tax code there are more provisions for accelerated depreciation even for those items which cannot be expenses.

The IRS spells this out pretty clearly. You can do a search and find the wording. Basically, if it is done in part or to service a problem/issue it is a repair. If it is a whole unit replacement (as in a new roof) it is an improvement.

If it's less than $2500, expense it. De minimus safe harbor.

If it's more, and you can compartmentalize it, do so and get the same benefit.

Improvements over that amount can be broken down into $2500 chunks and expensed right away.

If it's a $15,000 roof job...maybe do it in three stages.

Front of house: Labor $2,500; Shingles $2,500 - June 16th

Back of house: Labor $2,500; Shingles $2,500 - June 30th

Sides of houses: Labor $2,500; Shingles $2,500 - July 15th

6 receipts for $2,500. Expense it all.

Check with your CPA if there are any limits on this regarding timing, but I believe as long as they are bid and billed as separate jobs (i.e. Phases), this should work.

Hoosier,

IRS says if you change more than (40??)% of a SYSTEM such as plumbing or elec or roof it sit an improvement. My argumwnt is we did not “improve” anything, we fixed what was already there.

Don’t forget to fully depreciate what you remove. Example: we have a hailstorm not too long ago and replaced a roof that sas only 6 months old. The accountant wrote off the remaining 25 years of deprec from the 6 month old shingles thrown in the dumpster.