The bottom line is that you can spend a new roof on a rental property claiming an annual depreciation expense. A new roof on the property qualifies as an improvement, restoration or improvement to the property, which means that it is a capital improvement. Expenses incurred to return the property or its assets to the same conditions of use as they were, prior to the event that caused the property or asset to become unusable. Repair costs incurred are only deductible if incurred while the property is classified as rent.
Repair costs incurred in the process of preparing the property for rent are classified as upfront costs, amortized as such, and depreciate over time. The cost of roof repairs can be deducted if you own a rental property.
Roof replacementis considered an improvement and not a repair because it adds value to the property. You can recover the cost of a new roof by depreciating the value each year.
The cost of a new roof is a spending investment that most homeowners expect to be able to get some relief from when paying taxes. However, the IRS does not allow full deductions for this type of expense when it is incurred. In fact, depending on how the property is classified, the cost of a new roof may not be deductible as an expense at all. Unfortunately, you can't deduct the cost of a new roof.
Installing a new roof is considered a home improvement and home improvement costs are not deductible. If you own a rental property, you can cancel 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, using the same amortization method you use for the home.
It will take 27.5 or 40 years to pay off the full cost of the roof, depending on the method approved by the IRS you use. If the new cover is installed after the investment property is already in service, the new cover will be included as a separate asset relative to the property. One of the most frequently asked questions about roof replacement is whether the project is tax-deductible or not. Unless an alternative amortization method is used, the cost of the new roof will be divided equally by the number of years in the recovery period, and the result will be deducted as a depreciation expense each year until the roof is fully depreciated or until the property is sold or disposed of.
Unlike personal residences, the cost of new roofs installed on the investment property is not added to the property's cost base, except when the new roof is added before the property is put into service.