Repair or Capital Expenditure ?

Question

To the group:

In regards to a SF rental property, I have been trying to better define what would be considered a capital expenditure and what would be considered a repair.  In some instances, it is easy to tell:  Patch a roof -> Repair, Replace a roof -> CapEx, Replace one window -> Repair, Replace all windows -> CapEx.

But for me, I am wondering about other situations:

Remodel/replacing countertops: I would consider this CapEx, but I have seen some consider this a "repair".  Which one ?

Replace an appliance(s): CapEx or "repair" ?

Replacing a toilet in a 1 Bath unit: CapEx or "repair" ?

IRS Pub 535 runs through some of these situations, but there is some "grey zone" regarding this from what I can see.

Can anyone Clarify?

Thanks!

Patrick M. · Answer

There is a grey area and you can never base your labelling completely off another's. Look at the useful life of the item being replaced and base it off of that. Appliances are a CapEx, just at a more accelerated depreciation.

Some people are comfortable playing in the grey area... and some of those get more creative as they go. It sounds to me that you know what is what- just remember, they get you coming or going. Expense will come off today, CapEx will come off in depreciation or at sale.

David C. · Answer

@Patrick M.  Thanks for the reply!  Very good point about depreciation recapture, however, I would much rather take the deduction now, and pay it back later (free loan), as I am sure you already know.