In general, painting between tenants is considered a repair. However, if the painting is part of a larger restoration project or an addition, then it becomes an improvement. Whenever you repair or replace something in a rental unit or building, you must decide whether the expense is a repair or improvement for tax purposes. Why is it important? Because you can deduct the cost of a repair in a single year, while you have to depreciate improvements by up to 27.5 years.
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. 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. Repairs — According to the ATO, repairs are work carried out to resolve damage to the premise and general deterioration of rental property. The cost of repairs to the rental property (provided that repairs are ordinary, necessary and reasonable) are fully deductible in the year in which they are incurred.
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.