Capital vs. Repair Decision Tree

One page, four questions, and any rental property expense is classified correctly for the IRS. Repairs are deducted this year; improvements are capitalized and depreciated.

Download the Decision Tree (PDF)

No email required. Free from Real Cents Organized.

⬇ Download the Decision Tree (PDF)

What’s inside

A one-page visual flowchart: start at the top, and the first YES decides the classification
The $2,500 de minimis safe harbor as the first gate, so small purchases never reach the hard questions
The IRS Betterment, Restoration, Adaptation test in plain English
The two other safe harbors worth knowing: small taxpayer and routine maintenance
A side-by-side table of common calls: faucets vs. remodels, roof patches vs. roof replacements, furnace service vs. full HVAC

Why it matters: a $12,000 expense classified as a repair is a $12,000 deduction this year. The same expense classified as an improvement deducts a few hundred dollars a year for 27.5 years. Getting it wrong in either direction costs real money. For the full explanation of the test, read Capital Improvement vs. Repair: The IRS Test.

Want every expense classified right, every month?

We make the repair vs. improvement call as transactions land, so your CPA gets a clean capital improvements list in January.

Book a free 20-minute call →