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||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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