Can I expense a roof replacement on my rental?

8 Replies

I will be replacing the roof on one of my rental properties this summer.  The question is can I expense is all this year or do I have to depreciate it?  I ask because I've heard both sides lately.  The normal consensus is a roof replacement has to be depreciated, but I've read of instances where if you can't rent the house because the roof leaks the IRS has allowed it to be expensed. 

The other reason I ask is the company I work for replaced a roof last year and I was told that if it was a replacement and not a substantial roof improvement it was an expense and not a capital improvement.

In my mind this is a repair, because we are only replacing the shingles not the underlayment and it does not improve the roof design or type, and there is no improvement from the original.  If I have to depreciate it the depreciation could be more than the property is worth.

@Paul Caryl Of course most investors including myself want to expense it all this year. You are walking a fine line if you bend the rules too often. Ask a few good CPAs the question before finalizing your decision. A roof, like carpeting or a furnace etc.. can be written off over so many years. The IRS has a schedule which should be followed.

Unfortunately it has to be capitalized

See CFR  1.263(a)-3. Examples (j) 13, and (k) 15, both indicate you may expense IF you have the requisite facts. I have a roof to do soon that will have equivalent facts so I will definitely be expensing.

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@Paul Caryl

  1. Based on court cases removing and replacing all of the roof-covering material were deductible repairs because the purpose of the work was to prevent leaks and to keep the roof in good condition.
  2. However,  when the roofing material was removed down to the building's wooden structure, a new roof-drain added and a new roof reapplied (with the replacement roof expected to last 20 years), the court found that the existing roof had been replaced, so costs were capitalized. 

Replacing all the Shingles ( not just a few) is generally considered improvements. If you repaired part of the roof to prevent leaks would be considered repairs but you are replacing the entire roof because of its old life on top of the leaks, if any, would be a replacement. 

The examples provided above from the IRS regs talks about the roof membrane, which is not the major component of the roof, so replacing them would be a repair. However, if you replace a major component of what IRS call Unit of property (UOP), you have to capitalize the cost. But we can safely assume that ALL the shingles are the major component of the roof and replacing them is a replacement of the roof. 

If you want to take repair position make sure you can defend it. 

Good luck. 

@Christopher Smith

Just because you see the word "roof" in a paragraph does not mean you can ignore the other words. The examples in the Regs you cited apply to a roof membrane on a commercial property. 

You cannot expand it to roof replacement on residential homes.

Under the new tax reform, roof replacement on a commercial property can be fully expensed in the first year, but once again - commercial property.

Make sure your facts are actually equivalent.

@Paul Caryl - the correct answer is given by @Ashish Acharya

Originally posted by @Michael Plaks :

@Christopher Smith

Just because you see the word "roof" in a paragraph does not mean you can ignore the other words. The examples in the Regs you cited apply to a roof membrane on a commercial property. 

You cannot expand it to roof replacement on residential homes.

Under the new tax reform, roof replacement on a commercial property can be fully expensed in the first year, but once again - commercial property.

Make sure your facts are actually equivalent.

@Paul Caryl - the correct answer is given by @Ashish Acharya

 I didn't ignore the other words you have ignored mine, I said if your fact pattern fits the regulation example then expense. Mine does fit it so I will expense. I didn't say his did, that is his call.

That is the correct answer.

@Ashish Acharya

 Thanks for the info.  Some times it's hard to weed through the information you hear, so I appreciate the help.  The government certainly doesn't make it easy.

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