Investors – IRS Issues New Rules on Deducting Repair Costs

IRS Tax Returns

The Internal Revenue Service has issued a 255-page guide in the Federal Register. The new rules, which went into effect on January 1, change the way investors can deduct repair and improvement expenses.

In the past, most investors took the one-time deduction of the repair or improvement expense during the tax year in which it was done. The new rules clarify what is a repair and what is an improvement.

An ordinary business repair of an asset is generally tax-deductible in the current tax year. An improvement is usually classified as a capital expenditure and gets depreciated over time.

Eric Lucas, a principal at KPMG LLP and a former Treasury Department tax counsel, said in an interview that this one of the more significant changes” from current accounting policy and could be troublesome for businesses that took “an aggressive view” in deducting repairs.

Investors should discuss these changes with their CPAs or Tax preparers now in order to make preparing their 2012 tax returns easier next year.

Photo Licensed from iStock Photo | Blog based upon a story published in Inman News

About Tom Branch

Tom Branch has written 597 posts in this blog.


Have you ever just met someone, but felt you like you'd known him for years? That's what most people experience with Tom. He has a knack for making folks feel right at home. After 21 years in the Air Force, loyalty and honesty are the foundation of everything Tom does. In addition to being a Texas Real Estate Broker, Tom is a Certified Distressed Property Expert (CDPE) and a Short Sales & Foreclosure Resource (SFR).

Leave a Reply