Durango, CO asked in Tax Law for Colorado

Q: What kind of deduction can I take on rental property improvements?

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2 Lawyer Answers
D. Mathew Blackburn
D. Mathew Blackburn
Answered
  • Tax Law Lawyer
  • Englewood, CO
  • Licensed in Colorado

A: If it's a repair you deduct it in the year it's incurred. If it's an improvement you adjust basis and depreciation.

Any expense that is incurred under the ordinary and normal course of a trade or business is deductible. 26 USC 162.

Eric Steven Day
Eric Steven Day
Answered
  • Tax Law Lawyer
  • Henderson, NV

A: The IRS recently came out with some regulations indicating that if you were doing work on a piece of rental property and the invoice for that work was $2,500 or less, you wouldn't have to do the analysis as to whether that was considered a repair or an improvement. You could always consider it a repair and deduct the whole cost of the repair/improvement. This was to make the audit process more efficient. However, if the invoice was more than $2,500 and the work was considered to be an improvement to the property, or added value, then you would have to depreciate the cost of that improvement over the life of the asset. In a rental property's case, it would be depreciated out over 27.5 years for residential and 39 years for commercial.

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