--- title: Is Foundation Repair Tax Deductible on a Rental Property? description: The question as to whether you can deduct foundation repair expenses on your rental property generates another question. Namely, whether the activity falls under the category of home repair or home improvement. Learn more here. image: https://www.realized1031.com/hubfs/Foundation%20Repair.jpg --- [![Realized 1031 Exchange Marketplace](https://www.realized1031.com/hs-fs/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black.png?width=240&height=80&name=Realized-Logo-Black.png "Realized 1031 Logo") ](https://www.realized1031.com/) - [Wealth Management Gap](https://www.realized1031.com/the-wealth-management-gap) - [Our Process](https://www.realized1031.com/how-realized-works) - [Financial Advisors](https://www.realized1031.com/advisor) - [Resources](https://www.realized1031.com/resources) - [The Company](https://www.realized1031.com/about-us) - [Articles](https://www.realized1031.com/blog) [Register](https://www.realized1031.com/marketplace) [Log In](https://www.realized1031.com/login) - Better Business Bureau Rating: **A+** - [FINRA BrokerCheck](https://brokercheck.finra.org/firm/summary/22333) - [Call](tel:1-877-797-1031) **(877) 797-1031** # Is Foundation Repair Tax Deductible on a Rental Property? Posted May 25, 2022 ![Foundation Repair](https://www.realized1031.com/hs-fs/hubfs/Foundation%20Repair.jpg?width=1200&name=Foundation%20Repair.jpg) We’ve mentioned in previous blogs that investment in real estate—specifically, real estate that you buy as an investment and rent to others—comes with a plethora of deductions that can be used to offset income reported on your [annual tax return](https://www.realized1031.com/glossary/tax-return).  Given this, you might assume that any and all repairs made on your rental property could be reported on an [IRS Schedule E, Form 8825 or Form 4562](https://www.irs.gov/businesses/small-businesses-self-employed/tips-on-rental-real-estate-income-deductions-and-recordkeeping) for deduction purposes. But as is the case with much of the IRS reporting criteria involving real property used for trade or investment, the devil is in the details. This is definitely the case when it comes to property-related expenses. So the question as to whether you can deduct foundation repair expenses on your rental property generates another question. Namely, whether the activity falls under the category of home repair or home improvement. ### Repairing, Replacing, Upgrading Most of us tend to lump home improvements and home repairs under the same category. Not so according to the IRS. According to that organization: - Real property improvements are activities that actively improve the resale value and/or functionality of the rental property.  [According to the IRS](https://www.irs.gov/publications/p527), improvements result in “a betterment to your property, restores your property, or adapts your property to a new or different use.” - Real property repairs [fall under the category of maintenance](https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations), specifically, restoration and maintenance of the property to its original condition. For instance, replacing damaged or missing shingles on a roof is defined as a property repair. Replacing the entire roof is considered a property improvement. Painting the wall of your bedroom is a repair. Installing a new bedroom on the structure is an improvement.  Along those lines, replacing a crack in your property’s foundation is considered a repair, while replacing the entire foundation is regarded as an improvement. This is because foundation replacement represents an overall structural improvement that 1) ensures the house won’t collapse, and 2) [could increase your property value](https://www.homes.com/blog/2013/01/foundations-affect-on-home-value/). ### The Tax Treatment As the IRS has different definitions for repair versus improvement, it also has different tax treatments for each.  Property improvements—such as replacing your entire foundation—are considered [capital expenses or expenditures](https://realestatefinancialplanner.com/capex/). These are [depreciated over the asset’s useful life](https://www.realized1031.com/glossary/depreciation), which is 27.5 years for residential property and 39 years for commercial property. Meanwhile, your rental property repairs are deducted from rental property income [the same year during which the costs are incurred](https://learn.roofstock.com/blog/rental-property-repairs-vs-improvements). If you’ve made repairs to the cracks in your rental property’s foundation in May 2022, you would deduct those expenses from your 2022 income.  ### Function Determines Form The takeaway from this discussion is that foundation upgrade activities can be used to offset rental income. But it’s important that you understand whether that activity is to repair or replace (and, in turn, what IRS form is used to report the action). Repairing a crack versus replacing the entire base requires different tax treatments, which is something to discuss with your financial professional.   This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice, meeting the particular investment needs of any investor. Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation. 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Given this, you might assume that any and all repairs made on your rental property could be reported on an IRS Schedule E, Form 8825 or Form 4562 for deduction purposes. But as is the case with much of the IRS reporting criteria involving real property used for trade or investment, the devil is in the details. This is definitely the case when it comes to property-related expenses. So the question as to whether you can deduct foundation repair expenses on your rental property generates another question. Namely, whether the activity falls under the category of home repair or home improvement. Repairing, Replacing, Upgrading Most of us tend to lump home improvements and home repairs under the same category. Not so according to the IRS. According to that organization: Real property improvements are activities that actively improve the resale value and/or functionality of the rental property. According to the IRS, improvements result in “a betterment to your property, restores your property, or adapts your property to a new or different use.” Real property repairs fall under the category of maintenance, specifically, restoration and maintenance of the property to its original condition. For instance, replacing damaged or missing shingles on a roof is defined as a property repair. Replacing the entire roof is considered a property improvement. Painting the wall of your bedroom is a repair. Installing a new bedroom on the structure is an improvement. Along those lines, replacing a crack in your property’s foundation is considered a repair, while replacing the entire foundation is regarded as an improvement. This is because foundation replacement represents an overall structural improvement that 1) ensures the house won’t collapse, and 2) could increase your property value. The Tax Treatment As the IRS has different definitions for repair versus improvement, it also has different tax treatments for each. Property improvements—such as replacing your entire foundation—are considered capital expenses or expenditures. These are depreciated over the asset’s useful life, which is 27.5 years for residential property and 39 years for commercial property. Meanwhile, your rental property repairs are deducted from rental property income the same year during which the costs are incurred. If you’ve made repairs to the cracks in your rental property’s foundation in May 2022, you would deduct those expenses from your 2022 income. Function Determines Form The takeaway from this discussion is that foundation upgrade activities can be used to offset rental income. But it’s important that you understand whether that activity is to repair or replace (and, in turn, what IRS form is used to report the action). Repairing a crack versus replacing the entire base requires different tax treatments, which is something to discuss with your financial professional. This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice, meeting the particular investment needs of any investor. Realized does not provide tax or legal advice. 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