What are repairs and maintenance tax deductions?
Repairs and maintenance are tax-deductible when they keep assets in normal working condition. Routine fixes are expensed immediately, while major improvements must be capitalized and depreciated over time.
What are repairs and maintenance expenses?
Repairs and maintenance expenses include the costs of fixing, cleaning, or servicing property used in business operations. The IRS allows these deductions as long as the work restores an asset to its original condition rather than improving or upgrading it. Routine maintenance is treated as an operating expense, while major improvements must be capitalized.
How to categorize repairs and maintenance
- Record as Operating Expenses in your income statement.
- Use a “Repairs and Maintenance” account in your chart of accounts.
- Deduct routine or minor repairs that maintain normal operations.
- Capitalize large improvements or renovations that extend an asset’s useful life or increase its value.
- Keep documentation (invoices, photos, or service contracts) to prove that repairs were restorative, not capital in nature.
Examples of deductible repairs and maintenance
- Painting, patching walls, or fixing leaks.
- Servicing HVAC, plumbing, or electrical systems.
- Replacing worn-out parts or small components.
- Routine equipment inspections or tune-ups.
- Cleaning and minor repairs for business vehicles.
- Parking lot or exterior maintenance.
- Minor roof or window repairs.
When repairs must be capitalized instead
- When the work improves an asset’s efficiency or capacity.
- When it extends the asset’s useful life beyond the original estimate.
- When it adapts the asset for a new or different use.
- Examples: replacing an entire roof, adding new machinery, or remodeling office space.
Tax implications for repairs and maintenance
- Ordinary repairs are fully tax-deductible in the year incurred.
- Improvements that add value must be capitalized and depreciated over time.
- The IRS Safe Harbor Election (up to $2,500 per invoice or item) allows small businesses to expense qualifying repairs immediately.
- Routine maintenance on tangible property is generally deductible under the Routine Maintenance Safe Harbor.
- Keep receipts and detailed descriptions to justify deductions if audited.
- Report repair and maintenance deductions on Schedule C (for sole proprietors) or as “Repairs and Maintenance” on your business return.
