July 6, 2025
Repairs vs. Improvements: How Landlords Can Maximize Deductions in 2025
If you’ve spent money fixing up your rental property this year, you’re likely asking:
Can I deduct repairs right now, or do I have to depreciate it over time?
The answer depends on whether your expense is a repair or an improvement—as defined by IRS Publication 527—and getting this wrong can mean lost deductions, IRS scrutiny, or cash flow headaches.
Here’s how to tell the difference—and how Fortitude helps you get it right.
What’s Considered a Repair?
Repairs are expenses that keep your property in working condition without significantly increasing its value, prolonging its life, or adapting it to a new use.
Examples of deductible repairs:
- Fixing a broken toilet
- Patching drywall
- Replacing a few shingles
- Repainting a wall
✅ These are generally deductible in full in the year paid.
What’s Considered an Improvement?
Improvements add value, extend the life of the property, or adapt it to a different use. These must be capitalized and depreciated—typically over 27.5 years for residential rental property , per IRS Publication 946.
Examples of improvements:
- Renovating a kitchen or bathroom
- Replacing a full roof
- Installing central air conditioning
- Adding a deck or additional room
OBBBA & Bonus Depreciation Update (2025 Forward)
Thanks to the One Big Beautiful Bill Act (OBBBA) updates, certain improvements may qualify for 100% bonus depreciation—meaning you can deduct them fully upfront. This applies to specific categories like appliances, flooring, or short-lived building components.
We help our clients apply this correctly where eligible—because getting it wrong can trigger IRS headaches.
Safe Harbor Rules Landlords Should Know
The IRS provides several safe harbor elections that allow small landlords to deduct certain expenses upfront—even if they might technically look like improvements.
1. De Minimis Safe Harbor
Deduct any item or invoice $2,500 or less as a repair, even if it technically improves the property.
✅ Requires a consistent accounting policy and documentation.
2. Small Taxpayer Safe Harbor
If your average annual gross receipts are $10M or less and your building cost less than $1M, you may deduct certain maintenance and repairs in full.
✅ A valuable option for small landlords.
3. Routine Maintenance Safe Harbor
Expenses for expected, recurring maintenance can be deducted fully—even if they extend the property’s life.
Examples:
- HVAC inspections
- Gutter cleaning
Repainting
Partial Asset Dispositions: The Overlooked Opportunity
If you replace just part of a system—like a single HVAC unit or one section of roofing—you may be able to:
- Write off the remaining value of the portion removed
- Begin depreciation on the new asset using the appropriate schedule, guided by IRS Topic No. 704
This is one of those advanced tax strategies Fortitude helps our clients leverage—especially during remodels or updates.
Common Mistakes Small Landlords Make
🚫 Calling a full kitchen remodel a “repair”
🚫 Deducting without making the right safe harbor elections
🚫 Forgetting to capitalize large purchases
🚫 Not keeping receipts, logs, or proper election statements
These mistakes lead to disallowed deductions, penalties, and audit stress. Fortitude helps you avoid them.
Not sure how to avoid these common mistakes?
Fortitude Tax & Accounting helps small landlords confidently apply tax strategies like safe harbor elections, bonus depreciation, and proper expense classification—so you maximize deductions and stay IRS-compliant.
👉 Schedule a consultation today and protect your bottom line.
Real Estate Professionals: These Rules Still Apply
Even if you qualify for Real Estate Professional (RE Pro) status, you still need to classify repairs and improvements properly.
RE Pro status affects how losses are used—not how expenses are categorized.
Related Articles in This Series:
Frequently Asked Questions
Can I deduct a roof patch as a repair?
Yes—if you’re just fixing a leak or small section. A full replacement is an improvement.
What’s the limit for De Minimis Safe Harbor?
$2,500 per item or invoice ($5,000 with audited financials).
How does Routine Maintenance Safe Harbor work?
It applies to expected, recurring maintenance done at reasonable intervals.
Can I claim both a repair and improvement on the same project?
Sometimes. For example, patchwork repairs can be deducted separately from a larger renovation—but costs must be clearly tracked.
What’s a partial asset disposition?
A strategy allowing you to write off the undepreciated value of part of an asset you remove (like windows or flooring).
Do I need to file elections with the IRS?
Yes. Safe harbor elections often need to be filed with your return—and properly documented.
What if I’m unsure how to classify an expense?
Reach out to a CPA who understands real estate. At Fortitude, we help you sort it out—accurately and audit-ready.
Fortitude Helps You Maximize What’s Deductible
At Fortitude Tax & Accounting, we:
✅ Help small landlords document and deduct repairs properly
✅ Apply safe harbor elections where they fit
✅ Leverage bonus depreciation where possible under OBBBA
✅ Guide you through audits with confidence
✅ Ensure your deductions stand up to IRS scrutiny
If you’re unsure whether an expense is deductible this year, requires depreciation, or qualifies for a strategy like partial asset disposition—we’re here to help.
Ready to clean up your rental property deductions and protect your bottom line?
Let’s build a system together that works for today’s tax rules—and tomorrow’s opportunities.
👉 Schedule a consultation today and protect your bottom line.
Fortitude Tax & Accounting, located in Stansbury Park, Utah, just outside the Greater Salt Lake City area, specializes in proactive tax savings and accounting services tailored for therapists, real estate professionals, and small business owners. Led by Melissa Calwell, CPA, EA, with over 30 years of hands-on experience in both the private sector and public accounting, our firm offers comprehensive services including tax planning, tax preparation, bookkeeping, payroll, and tax strategies designed to maximize your savings. Choosing Fortitude Tax & Accounting means partnering with a firm committed to helping you achieve financial success through expert guidance and personalized service. Contact us today to learn how we can work together to optimize your financial future.
Fortitude Tax & Accounting has provided this article for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult their own attorney, business advisor, or tax advisor with respect to matters referenced in this post and their personal situation
