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Repair vs. Improvement: When Can You Deduct It?
Manage episode 498680575 series 3659469
A rental property owner faces a $27,000 repair bill after a plumbing leak forces a complete bathroom renovation, water heater replacement, and structural repairs. Jeremy breaks down Treasury Decision 9636's framework for distinguishing between deductible repairs and capitalized improvements, using the three-part test of betterment, restoration, and adaptation. He also explains three valuable safe harbors including the de minimis election and routine maintenance provisions that can help property owners expense more costs immediately rather than depreciating them over time.
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- (00:00) - Introduction to Repairs vs. Improvements
- (00:44) - Understanding the Basics of Repairs and Improvements
- (01:42) - Real Estate and Vehicle Examples
- (04:30) - IRS Guidelines and Treasury Decision 96-36
- (06:53) - Case Study: Rental Property Repairs
- (18:39) - Determining Repairs vs. Improvements
- (39:05) - Safe Harbors for Taxpayers
- (55:57) - Conclusion and Key Takeaways
Connect with Jeremy
https://www.linkedin.com/in/jwellstax
https://www.steadfastbookkeeping.com
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This podcast is a production of the Earmark Media
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