When it comes to rental property, it is important to understand the difference between repairs and improvements. Repairs are work carried out to resolve damage to the premise and general deterioration of rental property, while improvements are larger projects that extend the useful life or add value to the property. The cost of repairs is fully deductible in the year in which they are incurred, while improvements must be depreciated over a period of up to 27.5 years. Painting between tenants is generally considered a repair, as long as it does not form part of a larger restoration project or an addition.
However, if the paint directly benefits or is incurred as part of a larger project that is a capital improvement of the building structure, then the cost of painting is considered part of the capital improvement and is subject to capitalization. The IRS describes repairs as working on a home that is necessary to keep the home in good condition, but does not necessarily extend its useful life or add value. Minor repairs and maintenance work, such as changing door locks, repairing a leak, or fixing a broken window, do not qualify as capital improvements. Landlords can use the de minimis safe harbor to currently deduct any low-cost property items used in their rental business, regardless of whether or not the item would constitute a repair or improvement under regular repair regulations.