The short answer
It depends on what the work does. Under the IRS tangible property rules, work that improves the property, meaning a betterment, a restoration or an adaptation to a new use, is generally capitalized. Repairs and maintenance that are not improvements are generally deducted. Your accounting policies and your accountant make the final call. This is general information, not tax advice.
The framework
- Improvements are capitalized: betterments, restorations and adaptations to a new or different use.
- Repairs and maintenance are deducted when they are not improvements.
- A routine maintenance safe harbor applies to buildings.
- Buildings are evaluated in parts: the building structure and specific building systems are considered separately.
Watch the word "restoration"
In the trade, glass restoration means removing hard-water stains, scratches and oxidation. In the tax rules, a "restoration" is a specific kind of improvement. The same word does not mean the same treatment. Classify by what the work actually does, not by what it is called.
How exterior work is often classified
| Work | Often treated as | Why |
|---|---|---|
| Window cleaning, washing, gutters | Operating | Routine maintenance |
| Anchor inspection and certification | Operating | Recurring compliance maintenance |
| Hard-water stain removal on sound glass | Often operating | Keeps glass in its current condition |
| Restoring deteriorated glass or metal components | Possibly capital | May return a component to like-new condition |
| New roof anchors | Often capital | A new building component |
| Window or mullion replacement | Capital | Replacement of major components |
Examples only. Confirm each with your accountant.
Budgeting implications
- Tenant recovery: leases often let owners recover operating expenses, while capital recovery is more limited. It depends on the lease.
- Plan restoration as a choice. Scheduled restoration is cheaper and easier to classify than emergency replacement.
- Ask for clear invoices. Descriptions of exactly what was done make classification easier to support.
- Deferral changes the category. Skipped cleaning becomes restoration, and restoration left too long becomes replacement. See the real cost of deferred exterior maintenance.
Scope restoration before it becomes replacement
S&K will assess the glass and metal and tell you honestly whether it needs cleaning or restoration, and scope the work in writing. See glass and metal restoration.
Plan the whole program with the Exterior Maintenance Planning and Budgeting guide, or share your buildings and we will turn them into a tailored annual plan and a quote.
