Painting is a leasehold improvement only when it’s part of a larger renovation or a change to how the space is used. A standalone repaint to cover scuffs, peeling, or general wear is a repair, and you deduct it in the year you pay for it. The distinction matters because improvements get capitalized and recovered over years, while repairs come off your taxes right away.
When Painting Counts as an Improvement
Painting crosses into improvement territory when it’s bundled with a larger build-out or customization. Converting an open floor plan into private offices and painting as part of that project? The painting cost folds into the overall improvement. Same story if you install specialized coatings for a commercial kitchen, apply antimicrobial paint in a medical facility, or repaint an entire space in brand colors as part of a tenant build-out. The painting isn’t standalone maintenance in any of these; it’s a component of a broader change to the property’s use or value.
The IRS tangible property regulations back this up. When painting happens because of an improvement, the cost gets capitalized as part of that improvement. The regulations use a truck cab example: repainting the cab had to be capitalized because the painting was triggered by the larger restoration work, not by ordinary wear.1eCFR. 26 CFR 1.263(a)-3 – Amounts Paid To Improve Tangible Property The same logic applies to buildings. If the painting exists only because you’re doing something bigger to the property, it rides along with that bigger project.
When Painting Is a Repair
Standalone painting that restores walls to their current condition is a repair. Repainting to cover scuffs, fix peeling, address water stains, or freshen up a tired-looking space is maintenance. Landlords who repaint rental units between tenants or every few years are doing standard upkeep, and the IRS treats those costs as ordinary deductible expenses.2Internal Revenue Service. Tangible Property Final Regulations – Frequently Asked Questions
The IRS has spoken directly to this. When a property owner paints walls and refinishes floors to prepare a building for sale or continued use, that work does not adapt the property to a new or different use and is not treated as an improvement.2Internal Revenue Service. Tangible Property Final Regulations – Frequently Asked Questions The question is whether the painting restores the property to its existing condition or transforms it into something different. Cosmetic refreshes, no matter how thorough, stay on the repair side.
How the IRS Decides
The IRS uses three tests under the Section 263(a) tangible property regulations to decide whether work must be capitalized or can be deducted.2Internal Revenue Service. Tangible Property Final Regulations – Frequently Asked Questions Failing any one of them means the cost is capitalized.
The betterment test asks whether the work fixes a pre-existing defect, expands the property’s capacity, or materially increases its quality. Upgrading a space from bare drywall to a finished, branded office suite is a betterment. Repainting the same color over minor wear is not.
The restoration test asks whether the work brings the property back from disrepair, replaces a major component, or returns it to a like-new condition after significant damage. Repainting after fire or flood restoration gets capitalized. Repainting after normal aging does not.
The adaptation test asks whether the work changes the property’s use. Converting a retail space into a medical office, with specialized paint included, adapts the property. Repainting an office that stays an office does not.
For painting specifically, the answer almost always depends on context. The same gallon of paint can be a deductible repair in one situation and a capitalized improvement in another, based entirely on what else is happening to the property at the same time.
Tax Treatment If Painting Is Capitalized
When painting qualifies as part of a leasehold improvement to a commercial space, the combined cost is capitalized and recovered over time rather than deducted all at once. For interior improvements to nonresidential buildings placed in service after the building was originally put into use, the IRS classifies the work as qualified improvement property with a 15-year recovery period.3Office of the Law Revision Counsel. 26 USC 168 – Accelerated Cost Recovery System Building enlargements, elevators, escalators, and changes to the internal structural framework are excluded from this category.
Following the One Big Beautiful Bill Act signed into law on July 4, 2025, qualified improvement property placed in service after January 19, 2025, is eligible for 100% bonus depreciation. A tenant completing a qualifying build-out in 2026 can deduct the entire cost, including the painting component, in the year the work is finished rather than spreading it across 15 years. If a business elects out of bonus depreciation, the cost is depreciated straight-line over the 15-year recovery period.4The Tax Adviser. Qualified Improvement Property and Bonus Depreciation
The Section 179 deduction is another route. For tax years beginning in 2026, the Section 179 limit is $2,560,000, with a phase-out starting at $4,090,000 in total qualifying property placed in service during the year. Section 179 is worth considering for smaller projects where 100% bonus depreciation isn’t the preferred strategy.
The De Minimis Safe Harbor
Even when painting technically qualifies as an improvement, the IRS de minimis safe harbor lets you deduct smaller amounts outright. Without an applicable financial statement, you can expense up to $2,500 per item or invoice. Businesses with an applicable financial statement can deduct up to $5,000 per item or invoice.2Internal Revenue Service. Tangible Property Final Regulations – Frequently Asked Questions A painting job under these thresholds can be deducted currently regardless of how it would otherwise be classified. You make this election on your tax return for each year you want to use it.
What Your Lease Can Override
Your lease may define “improvement,” “alteration,” and “repair” in ways that don’t match the IRS categories. A lease might treat a complete repaint as an alteration requiring landlord approval, even if the IRS would call it a repair. Tax classification and lease classification are separate questions, and both matter.
Check three sections of your lease before starting any painting project. The alterations clause tells you what needs written permission. The maintenance clause tells you what you’re responsible for keeping up. The surrender clause tells you what condition the space must be in when you leave.
That surrender clause deserves particular attention. Commercial leases often require you to return the space to its original condition, which can mean repainting to the original color at your expense. If you painted the walls a bold brand color as part of your build-out, budget for returning them to their prior state unless your landlord agrees in writing to accept the space as-is. Negotiating this before signing, or at least before painting, is far easier than at move-out.
Whichever category the work falls into, keep invoices, before-and-after photos, and any written landlord consent. Documentation protects you in disputes about the condition of the space at lease end and supports the tax classification you claim.
Lead Paint Rules for Pre-1978 Buildings
One boundary worth flagging: the repair-versus-improvement classification has no bearing on federal lead safety rules. Any painting project in a building constructed before 1978 triggers requirements that landlords and tenants both need to follow.
The EPA’s Renovation, Repair, and Painting program requires that work disturbing paint in pre-1978 homes, childcare facilities, and preschools be performed by lead-safe certified contractors.5United States Environmental Protection Agency. Lead Renovation, Repair and Painting Program Homeowners doing work in their own homes are generally exempt, but the rule explicitly applies to rental property. A landlord who hires painters for a rental unit, or a tenant who hires painters for leased space, must use certified renovators if the building predates 1978.
Penalties are steep. Civil penalties for RRP violations can reach over $40,000 per violation, per day. Criminal penalties for knowing violations include fines up to $50,000 per violation per day, imprisonment up to one year, or both. Knowing endangerment carries up to 15 years imprisonment and fines up to $250,000 for individuals.
Landlords renting pre-1978 housing also owe tenants specific lead paint disclosures before lease signing: a copy of the EPA’s lead safety pamphlet, disclosure of any known lead-based paint or hazards, all available records and reports about lead paint, and a lead warning statement in the lease itself.6Environmental Protection Agency. Real Estate Disclosures About Potential Lead Hazards Signed copies must be kept for at least three years. Confirm your contractor holds EPA certification before any work begins on an older building, and confirm your disclosure obligations are current if you’re the landlord.