OTHER EQUIPMENT/PROPERTY

‍Repairs and Maintenance

Whether you are a landlord, Airbnb host, or sole proprietor you may be eligible to deduct repair and maintenance expenses you incur in the course of operating your business. Repairs and maintenance typically do not increase an asset's value or extend its useful life, rather they simply keep it in normal operating condition. Repair and maintenance costs may include incidental materials and supplies, inspection, cleaning and testing costs. Generally, these expenses are fully deductible in the year they are incurred.

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LANDLORD / AIRBNB HOST

Homer House, a rental property landlord, received a call from his tenant that her HVAC was not working properly. Upon inspection, Homer determined he could restore the HVAC unit to working order by replacing a part valued at $150. Homer can deduct the full value of this repair on his Schedule E. If instead Homer had determined the motor or entire unit needed to be replaced, these expenses would have been considered non-deductible improvements, which should be depreciated.

UBER DRIVER / RIDESHARE

Speedy Wheeler took his vehicle into the mechanic for routine maintenance and ended up replacing his timing belt. If Speedy uses the standard mileage deduction to capture his business vehicle expenses, the timing belt repair would be included in his $0.545 per mile deduction. If Speedy uses the actual method to deduct his vehicle expenses, he could deduct the cost of the timing belt directly related to his rideshare driving on line 9 of his Schedule C. Note that in neither circumstance would this repair be deductible on line 21 of his Schedule C.

ENTREPRENEUR

Andrew is a sole proprietor who makes custom bicycles. He replaces a small piece on his welder that had deteriorated over time due to normal wear and tear. Andrew can deduct the full value of this repair on his Schedule C.

DESIGNER

Jose is a graphic designer who specializes in making large scale prints. When Jose’s industrial printer stopped working half way through a job he had to get it fixed fast. Jose paid a technician $300 to diagnose the problem, then he spent $1,500 on parts, $400 on overnight international shipping, and $300 in installation. Jose can deduct the full $2,500 as repair and maintenance expense (or capital improvement if applicable).

TASKER

Leah is a teacher by day but on the weekends she is an active tasker, who has gained a reputation as the best “handyman” in the neighborhood. Leah would deduct any materials / supplies she purchases to fix others’ homes as Cost of Goods Sold, not repairs and maintenance. It is the homeowner who hired Leah who would deduct the cost of materials purchased from Leah, and Leah’s time as repairs and maintenance (or a capital improvement if applicable).

WHAT YOU NEED TO KNOW

Repairs and maintenance typically do not increase an asset's value or extend its useful life, rather they simply keep it in normal operating condition.
Repairs and Maintenance often times can be confused with capital improvements, which are depreciated. To determine the difference, remember that a capital improvement generally betters an asset, restores an asset, or adapts an asset for a new use. Additionally, an improvement may extend the useful life or add to the value of the asset being improved. Improvement expenses cannot be fully deducted when incurred. Talk with your accountant for clarity if your specific activity should be considered a repair or an improvement.
The IRS does not allow you to deduct the value of your own labor when calculating your repairs and maintenance deduction.
You can typically deduct all costs associated with your repair / maintenance including parts, installation fees, shipping, etc.
Business owners with $10 million or less in gross receipts for the last three years can elect not to depreciate building improvements made to properties with an unadjusted basis of $1 million or less if the value of the improvements is less than $10 thousand or 2% of the building's unadjusted basis.

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