How much can I deduct for rental property improvements?
When it comes to rental property improvements, it's important to distinguish between "repairs" and "improvements," as they are treated differently for tax purposes. **Repairs** are expenses that keep your property in good working condition, like fixing a leaky faucet or patching a hole in the wall. These can be deducted in full in the year they are incurred. **Improvements**, on the other hand, add value to the property, prolong its useful life, or adapt it to new uses. Examples include adding a new roof, installing a central air conditioning system, or remodeling a kitchen. Improvements must be capitalized, meaning you cannot deduct the full cost in the year you incur them. Instead, you recover the cost over time through depreciation. For residential rental property, improvements are typically depreciated over 27.5 years using the Modified Accelerated Cost Recovery System (MACRS). This means you can deduct a portion of the improvement's cost each year over this period. For example, if you spend $27,500 on a new roof, you would generally deduct $1,000 per year ($27,500 divided by 27.5 years) as a depreciation expense. It's also worth noting that the IRS has specific rules and thresholds under the Tangible Property Regulations that may allow you to expense certain improvements immediately if they fall below a certain dollar amount, known as the de minimis safe harbor. As of 2023, this threshold is $2,500 per item or
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