Repair versus Improvement

When figuring the worth (basis) of most items claimed for expense or deduction on your taxes, the amount is generally what you paid for it­ ─ including sales tax. This amount can be increased by improvements, but it is not increased by repairs. What is the difference?

Imagine a number line. The condition of an item when you purchased it is in the center of your number line, at zero. Wear and tear, including damages, drags the condition number down into the negatives. When you repair something, you are simply getting it back to zero, the original condition, on your number line. When you improve something, you are improving the condition into the positive numbers on your number line. You are making the item better than it was when you purchased it.

This and other information may be found in the book listed below.

Permission to use or excerpt with proper attribution.

Simon Elisha, author, Taxes for Online Sellers—
A How-To Guide for Individuals on Federal Tax for Internet Sales
ISBN: 978-0-9796328-0-8
http://www.taxesforonlinesellers.com