If payment for repair is deemed to be a capital expenditure, it will increase the amount of tax relating to property.
In the case she ( Investor ) pays money to repair wall paper or floor inside a room, she can down the amount of her payment to expense and deduct the amount of her payment from her sales and reduce the amount of taxable income.
But in the case she changes floor plan or repair outer wall of apartment building, depending on the situation, she can not sum up the cost as deductible expenditure.
And she needs to sum it up as capital expenditure.
I will take up an example.
Assumed that one of her renter leaves her room. She pays 300,000 yen to repair wall paper inside the room and floor.
If her payment is deemed to be deductible expenditure, she can reduce the amount of taxable income and reduce the amount of corporate tax.
However, if her payment is deemed to be capital expenditure, she can not deduct the amount of her payment from her sales at once.
In the case she repairs foundation of building or crack on outer wall, it will lengthen durable years of her building.
So, if she has paid 300,000 yen to do so, she needs to depreciate 300,000 yen every year according to depreciation rate.
This depreciation rate of her payment differs depending on statutory durable years of building.
For example, statutory durable years of rein forced concrete is 47 years.
So, if she repairs foundation of rein forced concrete building and her payment is deemed to be capital expenditure, she needs to depreciate 300,000 yen for 47 years.
Even if her building is 27 years old at the time of her repair, she needs to depreciate her payment for 47 years.
In the case the amount of her payment is 300,000 yen, she can deduct only about 6,300 yen every year. ( 300,000 yen / 47 = 6382 yen. Roughly speaking. )
With this small amount of money, she can not reduce the amount of taxable income adequately.
So, she needs to avoid such situation.
Please read ” Repair cost and Capital expenditure, No.３ “.
Or back to No,１