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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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This question is for Lev as he is great. Lev, this i

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This question is for "Lev" as he is great. Lev, this is regarding the differences between, "repair, maintenance, and improvements" in reference to rental property. On one of my properties, I have had drainage problems. The house is built on a slope and the builder never leveled the back correctly. Therefore, I had water in my crawl space and mold growing. I paid some workers around $2,100 to put drainage in on both sides of the property. I explained to the auditor that this in my perspective would be considerred, "repair or maintenance" as I was repairing a drainage problem trying to maintain the integrity of the house. He was not sure on this one. I explained to him that if I spent $2,100 putting in a courtyard patio, that would be an improvement. However, a drainage system may improve the property but so does mowing the lawn.

Sorry for delay...

 

Please refer to the IRS publication 523 - http://www.irs.gov/pub/irs-pdf/p523.pdf

 

Improvements. These add to the value of your home, prolong its useful life, or adapt it to new uses.

Repairs. These maintain your home in good condition but do not add to its value or prolong its life. You do not add their cost to the basis of your property.

 

The following chart lists some other examples of improvements. <table border="0" width="390">Additions
Bedroom
Bathroom
Deck
Garage
Porch
Patio Heating & Air Conditioning
Heating system
Central air conditioning
Furnace
Duct work
Central humidifier
Filtration system Lawn & Grounds
Landscaping
Driveway
Walkway
Fence
Retaining wall
Sprinkler system
Swimming pool

Miscellaneous
Storm windows, doors
New roof
Central vacuum
Wiring upgrades
Satellite dish
Security system
Plumbing
Septic system
Water heater
Soft water system
Filtration system

Interior
Improvements
Built-in appliances
Kitchen modernization
Flooring
Wall-to-wall carpeting

Insulation
Attic
Walls
Floors
Pipes and duct work

 

Examples. Repainting your house inside or outside, fixing your gutters or floors, repairing leaks or plastering, and replacing broken window panes are examples of repairs.

Exception. The entire job is considered an improvement if items that would otherwise be considered repairs are done as part of an extensive remodeling or restoration of your home. For example, if you have a casualty and your home is damaged, increase your basis by the amount you spend on repairs that restore the property to its pre-casualty condition.

 

You may find these definition a little vague - but these are the only we should rely...

I assume that the IRS agent has great experience dealing with such kind of issues and if you are trying to convince him/her to accept your interpretation of definitions without reference to precedences - that might be not the best move.

If you have been audited - you had better to have a local CPA or Enrolled Agent to represent you with the IRS.

Not only that person will instruct you for the best response, but the IRS agent will act differently if there will be a qualified representation in your case.

 

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