First, let's distinguish between and "repair" and an "improvement"
A repair essentially keeps the property stable and operating over
its probable life.  Improvements make the property better in some
way.  A more thorough definition is as follows:

Repair
A repair, as defined by the IRS, keeps your property in good
operating condition.  It does not materially add to the value of your
property or substantially prolong its life.  Examples of repairs are
repainting your property, fixing gutters or floors, fixing leaks,
plastering, and replacing broken windows.

The cost of repairs and maintenance is deductible provided they
do not "materially" add to the value of the property or appreciably
prolong its life.

If you make repairs as part of an extensive remodeling or
restoration of your property, the whole job is an improvement.

Example:  You repair a small section of one corner of the roof
of a rental house.  You deduct the cost of the repair as a rental
expense.  However, if you completely replace the roof, the new
roof is an improvement because it increases the value and
lengthens the life of the property.  You depreciate the cost of the
new roof.

Improvement
An improvement adds to the value of the property, prolongs its
useful life, or adapts it to new changes.  Examples are additions to
the structure, adding a swimming pool, installing a water filtration
system, and installing insulation.

Only maintenance and incidental costs are deductible against
rental income.  Improvements that add to the value or prolong life
of the property or adapt it to new uses are capital improvements.
These capital improvements cannot be deducted currently but
need to be depreciated over a recovery period of 27.5 years for
residential rental property and 39 years for commercial property.

You must carefully distinguish between repairs and improvements.
You must also keep accurate records of these expenses.  These
records will help you decide whether an expense is a deductible
or capital (added to the basis) expense.  However, if you make
repairs as part of an expensive remodeling or restoration of your
home, the entire job is an improvement. 

Example:  You buy an older home and fix up two rooms as a
beauty salon.  You patch plaster on the ceilings and walls, paint,
repair the floor, install an outside door, and install new wiring,
plumbing, and other equipment.  Normally, the patching, painting,
and floor work are repairs and the other expenses are permanent
improvements.  However, because the work gives your property
a new use, the entire remodeling job is a permanent improvement
and its cost is added to the basis of your property.  You cannot
deduct any portion if it as a repair expense.


Rental Property vs. Residential Property
The rules for rental properties are different from residential
properties.  Any repair made to a residential property is
completely non-deductible.  In other words, you get nothing! 
Improvements, on the other hand, get added to the basis of the
home and help reduce the gain, if any, when you sell the home. 


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