Yes - capital improvements vs repairs classification would be the same for business or for personal properties. Following are definitions:
Improvements add to the value to the property, prolong its useful life, or adapt it to new uses.
Repairs maintain the property in good condition but do not add to its value or prolong its life.
You may disagree with the IRS agent in interpretation of the specific expenses - and sometimes they may be viewed either way....
The IRS recently concluded that the cost of mold removal and remediation is treated as an ordinary and necessary business expense and deductible in the year paid.
The removal of mold is necessary because the health of the people in the building will be affected and mold remediation does not add value to the property.
However if the mold remediation is the part of a renovation plan that includes the entire property - the entire cost should be capitalized.
According to IRS Private Letter RulingNNN-NN-NNNN- http://www.irs.gov/pub/irs-wd/0607003.pdf
the tax treatment of the cost that increases the useful life of a building, add value to it or adapt it to a different use must be capitalized and depreciated over the applicable period prescribed by the Internal Revenue Code.
In PLRNNN-NN-NNNN the IRS determined that the cost of mold removal did none of these things; it merely kept the building serviceable - so the IRS permitted the cost to be deducted in the year incurred by the taxpayer. The ruling did state that it was presumed that none of the mold had been present at the time the taxpayer purchased the property - assuming otherwise - the mold remediation may have been treated as a part of the purchase cost.
Please be aware that
- the IRS Private Letter Ruling covers only specific situation and specific taxpayer and may not be applied to all other situation (but as a practical matter it serve as an example - not as a law)
- in this specific situation the cost of mold removal should be deducted on the schedule C (for property used in business) or schedule E (for rental property)
- this would not apply to the costs of mold removal in your home, which is a personal use property with respect to which maintenance costs are not deductible for income tax purposes.
- you may be able to treat the cost of mold removal for personal use property as causality loss - but that issue is not addressed in this PLR and should be discussed with your tax preparer.