Maintenance expenses are upkeep costs associated with keeping an asset functional. If these expenses are incurred as part of a business or management of a rental property, they can be deducted for tax purposes as long as careful records are kept. These differ from repairs and capital expenditures: repainting the frame of a window is maintenance; replacing a broken window is a repair; and installing a new window where one wasn’t present before is a capital expenditure designed to improve a property. Differentiating between types of expenses is important for accurate financial record keeping.
Assets like structures, equipment, and vehicles require maintenance to work right. This is part of the cost of using those assets to do business; a rental property, for example, needs to be kept in good condition so it can continue to be rented out. Like other valid business expenses, maintenance costs receive special tax treatment in recognition of the fact that some of the profits made from the business need to be plowed back into maintenance to keep the business operational.
These costs include anything that keeps assets functioning or addresses deterioration. Activities like changing the oil in cars, repainting homes, and tuning equipment to make sure it runs right are examples of maintenance expenses. Addressing wear and tear is also maintenance, unless the asset is actively damaged, in which case it becomes a repair. For example, a landlord might refinish floors between tenants to keep them in good condition, using maintenance to make sure the floors remain usable. If a tenant punched holes in the floor or cut through floorboards, they would need to be repaired.
Documentation relating to maintenance expenses can be used to prove them for tax purposes, where they act as a deduction to limit taxable income. There is a line on a tax return to declare them, along with other business costs. The cost is usually deducted from the taxpayer’s income. In rare cases, maintenance expenses may count as a tax credit; for example, some governments allow people to count weatherization expenses to increase energy efficiency as a credit to directly reduce their overall tax bills.
It is also important to consider the role of maintenance expenses in the overall cost for an asset. Thinking about the cost of keeping a car, for example, a business must consider the purchase price, registration and insurance, and the cost of maintaining it. These may be predictable with assistance from charts and graphs that discuss routine maintenance costs and servicing people can expect to perform on a vehicle, like timing belt changes and tire rotation.
