Rental Property Repairs vs Improvements
CRA's five questions for repair vs improvement, common landlord jobs sorted, and how to document the call.
The short version
- A current expense (a repair) is deducted in full this year. A capital expense (an improvement) is added to the property's cost and deducted slowly through capital cost allowance.
- CRA asks five questions: does it give a lasting benefit; does it restore or improve; is it a part or a separate asset; how big is it compared with the property's value; and was it to get a newly bought property ready to rent?
- Painting, patching and fixing things the way they were are usually repairs. Additions, upgrades, full replacements of a major system and fixing problems that came with the property are usually capital.
- Capital costs aren't lost: they raise your cost base, reducing the taxable gain when you sell, and can be depreciated meanwhile.
- This is the line CRA adjusts most often on rental returns. A specific invoice is your best defence.
Rental Property Repairs vs Improvements
Every landlord eventually stands in front of an invoice and asks: can I write this off now? Sometimes the answer is yes. Often it's "yes, but over 25 years." The difference between those answers can be thousands of dollars of tax this year, and it's the single most common reason CRA changes a rental return. Here's how CRA decides, with examples from the work landlords actually do.
CRA's Five Questions
| Question | Points to a repair (current) | Points to capital |
|---|---|---|
| Does it provide a lasting benefit? | Recurs after a short time (painting, servicing) | Lasts many years |
| Does it maintain or improve? | Restores to original condition | Makes it better than it originally was |
| Is it a part, or a separate asset? | Replaces a part of something (some shingles, a furnace motor) | Replaces a whole separate asset (a fridge, the whole furnace system) |
| How big is it relative to the property? | Small compared with the property's value | Large compared with the property's value |
| Was it to make a newly bought property ready to use? | Ordinary maintenance | Fixing problems that existed when you bought it |
No single answer settles it. A $9,000 repair can still be a repair; a $900 upgrade can still be capital. CRA's own illustration: painting the outside of a wooden house is a current expense; putting vinyl siding on it is capital.
Repair or improvement? Ask it straight
Describe the work, the amount and why it was done. The assistant applies CRA's five questions, tells you how CRA usually treats it, and what to write on the invoice and in your records.
Common Jobs, Sorted
| Job | Usually | Why |
|---|---|---|
| Painting between tenants | Repair | Recurring, restores |
| Fixing a leak, patching drywall, replacing broken tiles | Repair | Restores a part |
| Replacing some shingles after a storm | Repair | Part of the roof, restored |
| Re-roofing the whole house with similar material | Often argued both ways; frequently treated as capital | Lasting benefit, large cost |
| New metal roof replacing asphalt | Capital | Better than original |
| Replacing a broken fridge or stove | Capital (class 8) | A separate asset |
| Kitchen or bathroom renovation | Capital | Improves, lasting |
| Replacing carpet with similar carpet | Often a repair if it's wear and tear | Restores |
| Replacing carpet with hardwood | Capital | Upgrade |
| Furnace repair | Repair | Part |
| New high-efficiency furnace and air conditioning | Capital | Separate system, upgrade |
| Fixing a cracked foundation found when you bought | Capital | Problem existed at purchase |
| Adding a basement suite | Capital | Addition |
| Landscaping the grounds | Deductible in the year | CRA allows it specifically |
These are typical outcomes, not guarantees. The facts, including the property's age and condition, can push a job either way.
Why the Difference Matters
| $12,000 of work, landlord at a 29.65% marginal rate | Treated as repair | Treated as capital (class 1, building) |
|---|---|---|
| Deduction this year | $12,000 | Up to $720 (1.5 x 4%), limited by net rental income |
| Tax saved this year | about $3,560 | about $210 at most |
| Long run | Done | Deducted slowly; raises cost base for the eventual sale |
If CRA reclassifies a repair as capital, it reverses the deduction for that year, with interest. It isn't a penalty situation for an honest call, but it's a bill. More on depreciation is on CCA on rental property.
Sold a rental? Get the exact numbers for your return
The rental sale SmartFile works out recaptured CCA and the capital gain, estimates the tax, and prints the T776 and Schedule 3 lines.
Getting the Call Right
- Get specific invoices. "Replace 14 damaged shingles, same material" beats "roof work." Ask contractors to separate repair work from upgrades on the invoice.
- Photograph before and after. Proof of damage or wear supports a repair.
- Note why it was done: tenant damage, storm, normal wear, or an upgrade.
- Split mixed jobs. A renovation that also fixed a leak can be part repair, part capital, if the invoice shows it.
- Watch the first year. Work on a property you just bought is the riskiest to deduct; CRA tends to see it as getting the property ready to rent.
Repairs to Your Own Home
If you rent part of your home, repairs only to the rented area are deductible in full; repairs to the whole house are split by the rental share. Your own labour is never deductible, only materials and paid labour. See rental property expenses for the full list, and record everything on form T776 (line 8960 for repairs, Area A for capital).
If CRA has already reclassified your repairs, you have 90 days from the reassessment to object; see notice of reassessment: what to do. The overview is on rental property tax, and Return Check flags repairs that look like improvements before you file.
Repairs vs Improvements Questions
How does CRA decide if a rental expense is a repair or capital?
CRA looks at whether it provides a lasting benefit, whether it restores or improves the property, whether it replaces a part or a separate asset, its size relative to the property’s value, and whether it was to make a newly acquired property ready to rent.
Is a new roof on a rental property a repair?
Replacing part of a roof is usually a repair. Replacing the whole roof, particularly with a better material, is often treated as capital and added to the building’s cost.
Is replacing a fridge in a rental a repair?
Usually not. An appliance is a separate asset, so a replacement is a capital expense in CCA class 8.
Are renovations to a rental property deductible?
Renovations that improve the property are capital expenses: added to the cost and claimed through CCA over time, and they reduce the capital gain when you sell.
Can I deduct repairs I made right after buying a rental?
Repairs to fix problems that existed when you bought the property are generally capital, because they make the property ready to rent.
Sources: CRA, Guide T4036 Rental Income (current or capital expenses); Rental expenses you can deduct. Checked October 2026. The job-by-job table reflects CRA's usual approach and common outcomes; we are not sure how CRA would treat any particular job, and some (a full re-roof with like material, carpet) are decided both ways.
Last reviewed October 4, 2026 against CRA and Government of Canada sources. How we check our facts.