Question:   We have incurred substantial repairs to our residential rental property: new roof, gutters, windows, furnace, and outside paint. What are the IRS rules concerning depreciation?

Answer:   Replacements of roof, rain gutters, windows, and furnace on a residential rental property:

• Are capital improvements to the structure because they materially add to the value of your property or substantially prolong its life.
• Would be in the same class of property as the resudential rental property to which they are attached.
•  Are generally depreciated over a recovery period of 27.5 years using the straight line method of depreciation and a mid-month convention since the property is residential rental property.

Repairs, such as repainting the residential rental property:

• Are currently deductible expenses.
• Keep your property in good operating condition but do not materially add to the value of your property or substantially prolong its life.

NOTE:  Repainting your property, fixing gutters or floors, fixing leaks, plastering, and replacing broken windows are examples of repairs. If you make repairs as part of an extensive remodeling or restoration of your property, the whole job is an improvement. In that case, you should capitalize and depreciate the repair costs as the same class of property that you have restored or remodeled as discussed above.