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How to Deduct Recurring Maintenance? The Routine Maintenance Safe Harbor

The Tangible Property and Repair Regulations & guidance issued in 2013 and 2014 has many new provisions including new “safe harbors” and definitions which affect all businesses that have depreciable property or pay for supplies and repairs.

One area covered in the regulations is costs related to improving or repairing property and which of these costs must be capitalized versus expensed.

The Treasury included a new safe harbor for businesses that have routine and recurring amounts paid to keep property in working condition. The routine maintenance safe harbor gives businesses certainty in deducting these costs as repair costs.

The routine maintenance safe harbor applies:

  • To Non-building property – If the taxpayer expects to perform the maintenance activity more than once over the property’s life.
  • To Building property – If the taxpayer expects to perform the maintenance activity more than once during a 10 year period.

Routine maintenance costs for a building property can include inspection, cleaning and testing as well as replacement of damaged or worn parts with comparable and commercially available replacement parts.

Use of the routine maintenance safe harbor constitutes a change in method of accounting and requires the filing of a Form 3115, Change in Accounting Method to adopt the safe harbor method.

Be sure to discuss the use of the routine maintenance safe harbor in your business with your tax professional.

By Melinda Nelson, CPA & Michael Willett