Is Commercial Painting a
Capital Improvement?
Understanding tax implications and accounting treatment for commercial property painting projects
Quick Answer: It Depends on the Scope
Regular maintenance painting is typically an operating expense (deductible in the current year).
Extensive painting projects that are part of a larger renovation or improvement may qualify as a capital improvement (depreciated over time).
Important: Always consult with your tax professional or CPA for guidance specific to your situation and current tax regulations.
Understanding Capital Improvements vs. Maintenance
The IRS distinguishes between improvements that add value and routine maintenance that preserves existing value
Maintenance (Operating Expense)
Commercial painting is usually considered maintenance when it:
- Maintains the property's current condition
- Is performed regularly (every 5-10 years)
- Doesn't change the property's character
- Covers wear and tear from normal use
- Uses similar materials and colors
Tax Treatment: Deductible as business expense in the year incurred
Capital Improvement
Painting may be a capital improvement when it:
- Is part of a major renovation project
- Significantly improves the property
- Extends the property's useful life
- Adapts property to new use
- First painting of new construction
Tax Treatment: Capitalized and depreciated over 39 years (commercial property)
IRS Guidelines and Tests
The IRS uses specific tests to determine if an expense should be capitalized or expensed
The BAR Test for Capital Improvements
Under IRS regulations, an expense may be capitalized if it results in a:
Betterment
Painting that fixes a material defect, adds a material feature, or materially increases capacity, productivity, efficiency, or quality.
Example: Painting as part of converting office space to a medical facility
Adaptation
Painting that adapts the property to a new or different use than when originally placed in service.
Example: Repainting a warehouse to convert it into retail space
Restoration
Painting that returns the property to its ordinarily efficient operating condition after falling into disrepair.
Example: Extensive painting after purchasing a neglected building
Note: Regular repainting that doesn't meet any of these tests is typically treated as a deductible repair and maintenance expense.
Real-World Examples
Understanding how painting projects are classified in different scenarios
Maintenance (Expense)
- • Repainting office walls every 7 years
- • Touch-up painting in high-traffic areas
- • Exterior repainting with same colors
- • Painting to cover normal wear and tear
- • Annual parking lot line striping
- • Repainting after minor water damage
Capital Improvement
- • Painting new construction
- • Complete building renovation including paint
- • Painting to rebrand entire property
- • Specialty coatings for new use
- • Painting neglected/distressed property
- • Anti-microbial paint for healthcare conversion
The Safe Harbor Rule
The IRS provides a safe harbor for routine maintenance that allows you to deduct expenses for work performed at least twice during a 10-year period. Most commercial painting falls under this safe harbor provision.
Best Practices for Property Owners
Recommendations for properly classifying and documenting your painting projects
Document Everything
- • Keep detailed invoices and receipts
- • Document the scope of work
- • Take before and after photos
- • Note the business purpose
- • Track maintenance schedules
Separate Invoicing
- • Request itemized quotes
- • Separate painting from other work
- • Identify improvement vs. maintenance
- • Break out material and labor costs
- • Note any specialty coatings
Consult Professionals
- • Work with your CPA or tax advisor
- • Review current tax regulations
- • Consider cost segregation studies
- • Plan timing for tax benefits
- • Understand depreciation rules
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