Deducting Incidental Repairs in General
The cost of repairing property and equipment used in your business is a deductible business expense. In contrast, expenditures that materially add to the value of the property, prolong its life, or adapt the property to a new or different use must be capitalized (added to the basis of the property and recovered through depreciation). In most cases, the distinction is clear. If you pay a repair person to service your copying machine because paper keeps getting jammed, the cost of the service call is a repair expense and is currently deductible. If you put a new roof on your office building, you usually must capitalize the expenditure and recover the cost through depreciation. Sometimes, however, the classification of an expense as a repair or a capital expenditure is not clear. For example, in 1 case the cost of a new roof was currently deductible where it was installed merely to repair a leak and did not change the structure of the building or add to its value.
Guidelines on Distinguishing Between a Repair and a Capital Item
Repairs are expenses designed to keep property in good working condition. This includes the replacement of short-lived parts. Typically, the cost of repairs is small compared with the cost of the property itself.
Capital items, on the other hand, are akin to original construction. Costs are usually substantial. Temporary regulations designed to clarify when costs can be immediately deducted rather than ...