Repair vs. improvement
Repairs keep a property in working condition and are usually deductible in the year paid. Improvements add value or life and get capitalized. The line matters at tax time.
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See how it worksWhere this comes up: closing
Part 1 of 4
Why a seller cares
Repairs are deducted the year they are paid; improvements are added to basis and recovered at sale. The line decides what lowers the gain on your home, and the receipts have to be sorted by it.
Part 2 of 4
A simple example
Over ten years: $14,000 for a new roof, $28,000 for a kitchen, $9,000 of repairs and painting. $42,000 counts toward basis; $9,000 does not.
| The spending | Which side of the line |
|---|---|
| A new roof | Improvement; adds to basis |
| Patching the roof | Repair; deductible on a rental, nothing on your home |
| A kitchen remodel | Improvement |
| Replacing a broken window | Repair |
Improvements add value or life and go in the basis. Repairs keep things working and do not.
Part 3 of 4
What people get wrong
That any big check is an improvement. A big repair is still a repair; it is the nature of the work, not the size of the bill.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
In your Room, this word explains itself where it appears.
Your Room defines repair vs. improvement in the step you meet it in, beside the document or the date it belongs to. Free to set up, with an agent or on your own.
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