Repairs vs Improvements for Taxes: What You Can Deduct Now vs Later

For the IRS, repairs keep your rental in normal operating condition and are generally deductible in the year you pay. Improvements add value or extend useful life and must be depreciated (or may qualify for bonus depreciation). Getting the classification right helps you deduct what you can now and avoid mistakes. For how depreciation works, see Depreciating Assets; for deadlines and the full tax picture, see our Tax Prep Checklist. For the operational side—what you fix day to day—see Who Fixes What?.

Repairs: Deduct in the Year You Pay

A repair restores something to its prior working condition without adding value or extending useful life. Examples: fixing a leaky pipe, patching a hole in the wall, replacing a broken door seal on the fridge, or repainting a room to touch up wear. The IRS lets you deduct these costs in the year incurred on Schedule E (rental income). So you get the tax benefit right away—so long as you keep receipts and records. For what to keep and how long, see What Records to Keep.

Improvements: Depreciate (or Use Bonus Depreciation)

An improvement adds to the value of the property or substantially prolongs its useful life. Examples: a new roof, a full kitchen remodel, replacing an old HVAC with a new system, or adding a new fixture (e.g. a second bathroom). Improvements are not deducted in full in year one; they are depreciated over a recovery period (e.g. 27.5 years for the building, 5 or 7 years for certain personal property). Under current law, qualifying property placed in service after January 19, 2025 may qualify for 100% bonus depreciation—you can write off the full cost in year one. For the details, see Depreciating Assets and the IRS tangible property regulations.

Examples: Repair vs Improvement

Repair (deduct this year): Fixing a refrigerator door seal for $50; repairing a broken window; unclogging a drain; repainting a single room to address wear. Improvement (depreciate or bonus depreciate): Replacing the entire refrigerator for $1,200; installing a new water heater; adding central air; renovating the whole kitchen. The line can be fuzzy—replacing one broken appliance part may be a repair, while replacing the whole appliance is often an improvement. When in doubt, the IRS tangible property regulations and your CPA can help. Classifying correctly keeps you audit-safe and lets you take the right deduction at the right time.