If you pay for a new roof this year, don't expect to write it off on your taxes. Other than a few special cases, you can't deduct home improvements on your 1040. If you reroof a rental house, you can deduct the cost gradually over time. If it's your personal home, you have to wait until you sell to gain any tax advantages.
The IRS measures your capital gains when you sell your house by subtracting the "adjusted basis" from the sale price. The basis is what you originally paid; adjustments include any improvements that increase the value of the home, such as a new roof. If you buy a house for $190,000 and sell it for $240,000, your gain is $50,000. If you paid $20,000 for a new roof before selling, the gain is only $30,000.
If you own rental property, you can write off roof repairs as a deduction. Replacing the roof counts as an improvement, not a repair, because it adds substantial value to the property. Instead of claiming a deduction, you recover the cost by depreciating the value each year, based on the same depreciation method you use for the house. It will take either 27.5 years or 40 years to write off the total cost of the roof, depending which IRS-approved method you employ.
The IRS defines a casualty as the destruction of your property due to a sudden, unexpected event such as a fire, storm or a meteorite strike. If your house loses value because a windstorm ripped away your roof, you can claim the loss as a tax deduction. You claim the loss rather than the replacement cost, but if it costs you $15,000 to get a new roof, that's evidence of how much value the house lost. You can't claim any casualty losses your insurer reimburses you for.
When adjusting your basis, include everything you spent on the roof, both for labor and materials. You cannot, however, include the value of your own work on your own house, even if you're a roofing pro. Keep records of your spending as long as you own the house. You need the paperwork to prove you're depreciating the right amount, and -- when you sell -- that you've adjusted your basis correctly.
- Comstock/Comstock/Getty Images
- How to Calculate Unrealized Gain
- Tax Deductions for Reroofing
- How Do Assessments for Streets Affect Income Taxes?
- Can You Deduct Renovations on a Rent House That Is Rented?
- Can I Claim a Tax Deduction on Money Paid to a Handyman for Home Repairs?
- Can I Claim House Repairs on My New Home on My Tax Return?
- Can I Deduct Depreciation on My Primary House?
- How Is Flooring Depreciated in a Rental?