La Quinta, CA
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Tuesday, May 12, 2015

Paint Job as a Capital Cost Basis/Depreciable Asset or Expense for Real Estate Business

Many rental owners and commercial real estate owners in the real estate business are unsure whether painting their property should be an expense or a capital cost that is depreciated over the next 5 years.

Paint is Typically an Expense

The rule of thumb is that capital costs must increase the value of the property and not be a cost related to maintaining and operating your rental property or commercial real estate. Typically paint is part of ordinary maintenance or repairs and would be classified as an expense.

  • Was the paint job part of maintaining the property?
  • Was it a part of the operating expenses of your commercial or rental property?
  • Was the property already in use when it was painted?
  • The costs associated with painting should be expensed

When can a Paint Job be a Capital Cost?

Although painting a rental property or commercial real estate is most commonly an expense, one may justify capitalizing the cost and depreciating it over the next 5 years. This is beneficial as you may not want to expense the paint job out in one year.

One could justify a paint job being a capital cost if the paint was to solely improve the curb appeal of your rental property or commercial real estate to attract new customers and improves the value of your property, or to match the new colors of your company color theme. Here are some more ways that a paint job to your commercial real estate or rental property might be considered a capital cost:

  • Painting of new construction not yet in use
  • Changing paint colors to match company colors
  • Changing the look of a rental property to attract buyers/renters
Every situation is different and using a paint job as a capital cost may or may not be allowable. We prepare income tax returns for real estate managers, Canadian Landlords with property in the U.S., and tax solutions for many different tax situations. 

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(760) 895 3516