Repairs vs. Improvements

Generally, a current business deduction is allowed for the cost of repairs and maintenance incurred during the year. On the other hand, the amounts paid to acquire, produce, or improve tangible property must be capitalized. Since repairs and improvements often have very similar characteristics, it can be tricky to classify the expenditures. However, correct classification is important because the cost of repairs can generally be deducted in the year paid, while improvements must be capitalized and the deduction taken over several years through depreciation.

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