In order to determine whether and expense is an improvement or repair, you must consider the Unit of Property (UOP) that is affected.
For larger UOPs, work performed on the component will likely result in being classified as a repair versus an improvement. In order to be classified as an improvement, the work must be significant in scope and in cost as it relates to the affected UOP.
There are nine defined UOPs by the IRS:
- The building structure: consists of the building and all structural components other than those UOPs listed below (IRS Reg. § 1.263(a)-3(e)(2)(ii))
- Heating, ventilation, and air conditioning system
- Plumbing systems
- Electrical systems
- Escalators
- Elevators
- Fire protection and alarm system
- Security system
- Gas distribution system
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