Because it changes when you get your tax break.

• Repairs: Routine maintenance or fixes to keep the property in good shape — these can usually be deducted in full the year you pay for them.
• Improvements: Bigger projects that add value, extend the life of the property, or adapt it for new use — these must be capitalized and depreciated over multiple years.

Get it right, and you keep your tax bill low. Get it wrong, and you risk an audit or miss out on deductions.

Repairs are things that keep the property in normal working condition — think:

• Fixing a leaky faucet
  
• Patching a roof leak
  
• Repainting a room
  
• Replacing broken windows
• Small plumbing or electrical fixes

The key is you’re restoring what’s there — not adding new value or extending its life significantly.

Improvements are upgrades or major changes that add value, prolong the property’s life, or adapt it for a new purpose.

Examples:

• Putting on a brand-new roof
  
• Adding a room or finishing a basement
  
• Upgrading to high-end windows
  
• Installing a new HVAC system
  
• Major kitchen or bathroom remodels

 The IRS sees these as adding to the value of the property — so you have to spread the cost over 5, 7, 15, or 27.5 years depending on what it is.

 This is where landlords get tripped up.

• If you fix a broken dishwasher? That’s a repair.
  
  
• If you replace it with the same basic model? Often still a repair.
  
  
• If you upgrade from basic to luxury appliances as part of a full kitchen redo? Now it’s part of an improvement project.

Same goes for flooring, HVAC parts, or lighting — context matters.

The IRS offers a Safe Harbor for Small Taxpayers — if your rental is under $1 million and your annual repairs, maintenance, and improvements are less than $10,000 (or 2% of the property’s unadjusted basis), you can deduct those costs in full rather than capitalize them.

There’s also the De Minimis Safe Harbor — if you have an invoice for a tangible item (like a new fridge) under $2,500, you can often expense it immediately instead of depreciating it.

Plenty of landlords do — until they get audited. If the IRS finds you wrote off a major remodel as “repairs,” they can disallow the expense, force you to capitalize it, and hit you with penalties and interest.

Better to follow the rules up front — or use safe harbors and elections that let you deduct more without crossing the line.

 Keep clear records:

• Invoices and receipts
  
• Before-and-after photos
  
• Notes about what was fixed vs. what was upgraded

If you get audited, this backs up your claim that something was a repair, not an improvement. The burden of proof is always on you.

If you’re doing big renovations, adding rental units, or converting a property’s use — run it by your tax pro first.

There may be ways to structure the work so more costs qualify for current deductions instead of long depreciation. Small fixes are simple — big projects deserve a second look.