The short answer
A repair that keeps property in ordinary working condition is generally deductible in the year you pay it. An improvement — a betterment, restoration, or adaptation — must be capitalized and is generally depreciated over several years. Three safe harbors can let you deduct some costs that would otherwise be capitalized, but each has its own conditions, and two require an election attached to your return.
The three kinds of improvements
| Type | What it means | Rental examples |
|---|---|---|
| Betterment | Fixes a pre-existing defect or condition, enlarges or expands the property, or increases its capacity, strength, or quality | Adding a bedroom or deck; upgrading to a much higher-quality system |
| Restoration | Replaces a substantial structural part, repairs damage after a casualty basis adjustment, or rebuilds the property to like-new condition | Replacing the entire roof; replacing the whole heating system |
| Adaptation | Alters the property to a use not consistent with its intended ordinary use when you began renting it | Converting a residential unit into office space |
Publication 527 lists common improvements, including additions, a new roof, storm windows, landscaping, a fence, central air conditioning, a furnace, a water heater, built-in appliances, kitchen modernization, flooring, and wall-to-wall carpeting.
Three safe harbors
| Routine maintenance | De minimis safe harbor | Small taxpayer safe harbor (buildings) | |
|---|---|---|---|
| What it covers | Recurring work to keep property in ordinarily efficient operating condition | Small acquisition or production costs per invoice or item | Repairs, maintenance, improvements, and similar work on an eligible building |
| Key limits | Work resulting from your use of the property in your trade or business that, for buildings, you reasonably expect to do more than once in the 10 years after the building is placed in service; not for betterments | $2,500 per invoice or item ($5,000 with an applicable financial statement); you must also expense the cost in your books and records; not for land or inventory | Average annual gross receipts of $10 million or less; building unadjusted basis of $1 million or less; total yearly spending on that building no more than the lesser of $10,000 or 2% of its unadjusted basis |
| Election? | No annual election statement; Form 3115 only if changing your accounting method to use it | Yes — an annual statement attached to a timely filed original return, including extensions | Yes — an annual statement attached to the return for that year |
| Applies to | All qualifying amounts | All qualifying amounts that year once elected | All the qualifying work on that building for the year |
These safe harbors are annual elections or rules, not changes in accounting method, so Form 3115 is not filed to use the de minimis or small taxpayer safe harbor for a year. If an amount does not fit a safe harbor, you can still deduct it if it is a repair under the general facts-and-circumstances analysis.
When you must depreciate
- Capitalized improvements are added to basis and depreciated, generally as if they were separate property.
- Improvements to a residential rental building, such as a new roof, use the building's recovery period — 27.5 years under the general depreciation system.
- Appliances, carpeting, and furniture used in residential rental property are 5-year property.
- Faster methods, such as bonus depreciation or section 179, may be available for some property; see Section 179 and bonus depreciation.
Examples (2025, residential rental)
| Cost | Treatment |
|---|---|
| $350 to fix a leaking faucet and patch drywall | Repair — deductible on Schedule E |
| $1,800 refrigerator, de minimis safe harbor elected, and expensed in the owner's records | Deductible under the de minimis safe harbor; without the election, it is 5-year property |
| $14,000 to replace the entire roof | Restoration — capitalized and depreciated over 27.5 years; too large for the small taxpayer safe harbor, which is capped at $10,000 a year per building |
| Building with $300,000 unadjusted basis; $5,500 total spent on it in the year | Within the small taxpayer limit ($6,000 = lesser of $10,000 or 2% × $300,000), so all $5,500 can be deducted if the election is made |
| Same building, but $7,000 total spent | Over the limit, so the small taxpayer safe harbor is not available for that building for the year; each cost is analyzed under the general rules |
The de minimis safe harbor is measured per invoice or item, and both elections must be attached to the return. Keep invoices, a written expensing policy, and copies of your election statements, and separate repair costs from improvement costs in your records.