Repainting a rental property does more than boost its curb appeal.
Exterior painting can be a substantial financial commitment, but that new paint can significantly extend the life of your home’s wood siding. Paint keeps out water, which can cause rot, swelling, sagging, bulging, and also lead to mold. Interior painting of a rental property, meanwhile, provides an important visual refresh that can make the property look newer and more appealing for current or prospective tenants.
Investors have asked whether painting is a capital improvement, since the answer determines how the expense should be treated when completing your annual tax return. Read on to learn more about how to treat the expense of painting a rental property at tax time.
Painting Costs
New paint can help revitalize an investment property, but it can be costly.
Experts suggest repainting your rental home’s exterior about every five years, or more often if you notice areas lacking paint with exposed wood. If you decide to do the job yourself, expect to spend between 40-60 hours. If you hire a licensed painting contractor, expect to pay between $3,000 and $5,000, though costs could be much higher for larger homes or two-story hillside homes with hard-to-reach areas.
For interior painting, expect to pay between anywhere from $2,000 to $10,000. Costs will vary greatly depending on the quality of paint, size of your home, materials, labor, and how much furniture needs to be moved. Other considerations are whether painters need to patch or repair damaged drywall, and if the home has cathedral or vaulted ceilings, which are much more difficult to paint than standard 9-foot-tall ceilings and could push painting costs much higher.
When Does Painting Qualify as a Capital Improvement?
According to the Internal Revenue Service, painting may qualify as a capital improvement if it’s part of large-scale improvements to a rental property. Painting by itself, however, is generally not considered a capital improvement.
Here’s an example: Your rental property is in need of some serious TLC. You incur substantial costs to replace the roof and install new aluminum gutters. During the improvement process, you also install all new energy-efficient windows and spend money upgrading the furnace and air conditioning unit. You also had the residence painted inside and out.
These improvements are general restoration upgrades that replace major components of the property and therefore are considered capital improvements.1 They can be depreciated over a 27.5-year timespan using the straight-line depreciation method.
If all those components of your rental property are in decent shape, though, and you just want to paint the residence, then the cost of painting generally isn’t considered a capital improvement under IRS capitalization rules – although it is a deductible repair expense.
The Bottom Line
Painting a rental property is generally considered a repair expense much like replacing a damaged door, leaky faucet, or broken window. However, if new paint is part of large-scale improvements to the residence, it likely will qualify as a capital expense. Consult with an experienced tax professional to discuss your particular situation so you understand the tax treatment of costs incurred from painting your rental property.
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.
