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Are rental repairs and capital improvements tax deductible?
The BAR test separates a current line 14 repair from a capital improvement on line 18, with roof and mixed-project examples.
7 min read·
Short answer
A true repair is generally deductible in the year paid. A capital improvement is recovered through depreciation after it is placed in service unless a valid expensing provision or safe harbor applies. The BAR test decides the split. Work that keeps the property in ordinarily efficient condition can be a current repair. Work that betters, adapts, or restores the relevant unit of property creates or adds to a capital asset.
A true repair is generally deductible in the year paid. A capital improvement is recovered through depreciation after it is placed in service unless a valid expensing provision or safe harbor applies. The BAR test decides the split. Work that keeps the property in ordinarily efficient condition can be a current repair. Work that betters, adapts, or restores the relevant unit of property creates or adds to a capital asset.
A worked classification for repairs and capital improvements
A $750 patch around one roof vent, with the rest of the roof left in service, is generally a line 14 repair. Replacing the entire roof for $14,000 is a restoration on a 27.5-year schedule. For a $24,000 kitchen project, $17,000 of cabinets and built-ins plus $2,000 of painting integral to the remodel follow the building schedule, while $5,000 of qualifying appliances use 5 years. The full project is not a repair deduction.
Records that support this treatment
Keep contracts, permits, itemized invoices, proof of payment, before-and-after photos, technician notes, asset-class allocations, placed-in-service evidence, and the depreciation schedule through disposal. Detail showing what failed and the scope of the fix is more useful than an invoice that only says repair.
This is general information for organizing rental records, not tax advice. Elections, entity structure, mixed use, and the exact unit of property can change the answer. Bring the invoice and the underlying facts to a CPA before filing.
Questions landlords actually ask
Is repairs and capital improvements deductible on a rental property?
A true repair is generally deductible in the year paid. A capital improvement is recovered through depreciation after it is placed in service unless a valid expensing provision or safe harbor applies. The BAR test decides the split. Work that keeps the property in ordinarily efficient condition can be a current repair. Work that betters, adapts, or restores the relevant unit of property creates or adds to a capital asset.
Where does repairs and capital improvements go on Schedule E?
Current repair costs go on Schedule E line 14. Depreciation on capital improvements flows to Schedule E line 18, usually from Form 4562 and the depreciation schedule.
What happens if repairs and capital improvements must be capitalized?
Review related jobs together when they are part of one plan. Allocate a mixed project among building work, personal property, land improvements, and land. Demolition, design, permits, freight, and installation often join the basis of the asset they produce. Residential building improvements generally use 27.5-year straight-line MACRS and the mid-month convention. Appliances and carpet generally use 5-year MACRS; fences and driveways generally use 15-year MACRS.