Ever had them question something borderline, like replacing a water heater?
Funny you mention water heaters. Had a similar situation—replaced one after it died and tried to call it a repair. IRS pushed back, but my accountant argued it was just restoring function, not upgrading. Ended up going through, but man, it felt like a gray area. Sometimes I think it depends on who’s reviewing your file that day...
That’s interesting, because I’ve seen the IRS get pretty picky about what counts as a “repair” versus an “improvement.” You mentioned,
my accountant argued it was just restoring function, not upgrading
but I’ve read that even if you’re just swapping out a dead water heater with a similar one, they sometimes still call it an improvement since it extends the useful life of the property. It’s wild how much hinges on the wording and interpretation.
I always wonder—if you upgraded to a tankless system, would that cross the line even more? Or does it come down to whether it’s necessary for habitability? I’ve had clients get mixed answers from different tax pros. Sometimes feels like there’s no real consensus until you’re actually audited.
Honestly, the “gray area” thing is spot on. I wish the IRS would just spell out more examples. Makes you think twice about how you categorize anything bigger than a leaky faucet...
It’s wild how much this comes down to interpretation. I’ve had situations where the exact same expense got different treatment depending on who was looking at it. One year, I replaced a busted furnace with a new one—same model, nothing fancy—and my tax guy said it was a repair. Next year, different accountant, similar situation with an AC unit, and suddenly it was an “improvement” that had to be depreciated. Felt like flipping a coin.
The tankless water heater example is interesting. I’d argue that’s definitely an upgrade, but if your old one died and the tankless is the only thing available or the most reasonable option, does that make it a necessity? Or is it always going to be seen as an improvement just because it’s more efficient? The IRS guidance is so vague, it’s almost like they want to keep us guessing.
Ever run into issues with stuff like new windows or roofing? I’m never sure if those count as repairs unless you’re just patching up a leak. The line gets blurry fast...
The IRS guidance is so vague, it’s almost like they want to keep us guessing.
You’re not kidding about the vagueness. I’ve had similar headaches with window replacements—sometimes it’s a “repair” if you’re just swapping out damaged panes, but a full set of new energy-efficient windows? Suddenly it’s an improvement, even if the old ones were falling apart. Roofing gets even trickier. Patch a leak and it’s a repair, but replace half the roof and now you’re into depreciation territory. It really does feel arbitrary at times. I wish there was more consistency, but I guess that’s just part of the game.
Honestly, I’ve had clients get tripped up on this exact thing. One person replaced their HVAC and thought it was a straight repair—nope, the IRS called it an improvement. Ever try explaining that to someone who just wanted to fix their AC? The line between “repair” and “improvement” is way blurrier than it should be. Anyone else feel like the IRS could use a few more real-world examples in their guidance?
