Current or capital expenses

A current expense is one that generally recurs after a short period. For example, the cost of painting the exterior of a wooden house is a current expense.

A capital expense generally gives a lasting benefit or advantage. For example, the cost of putting vinyl siding on the exterior walls of a wooden house is a capital expense.

Renovations and expenses that extend the useful life of your property or improve it beyond its original condition are usually capital expenses. However, an increase in a property's market value because of an expense is not a major factor in deciding whether the expense is capital or current. To determine if an amount is a current expense or a capital expense, consider your answers to the questions in the following chart.

Criteria for determining if a capital expense or a current expense
Criteria Capital expenses Current expenses
The expenses provide a lasting benefit. Generally, they give a lasting benefit or advantage. For example, putting vinyl siding on the exterior walls of a wooden house. Generally, they reoccur after a short period of time. For example, painting the exterior of a wooden house.
The expenses maintain or improve the property. Generally, they repair and improve a property beyond its original condition. For example, if you replace wooden steps with concrete steps. Generally, they restore a property to its original condition. For example, repairing wooden steps.
The expenses are for a part of the property.

Generally, they are new assets replacing existing assets that are within the property. For example, buying a compressor to use in your business operation. It applies because a compressor is a separate asset, not part of the building.

Generally, they repair a part of the building. For example, electrical wiring is part of a building. Any amount spent to rewire, as long as the rewiring does not improve the property beyond its original condition, can be claimed as a current expense.
What is the value of the expenses?
(Use this criteria only when you cannot determine if an expense is capital or current from considering the three previous criteria).
Generally, they are of considerable value in relation to the value of the property. Generally, they are costs for ordinary maintenance that was not done when necessary. You can deduct these expenses as current expense.
The expenses are to put used property you acquired in suitable condition for use in your business operation. Generally, they repair used property you acquired to a condition suitable for use. Generally, they are ordinary maintenance repairs to property you already own and use in your current business.
The expenses are for repairs made to an asset in order to sell it. Generally, they are repairs made in anticipation of selling a property or as a condition its sale. Generally, they are repairs you have made, but not in anticipation of selling the property or as a condition for its sale.

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