The topic of roof repairs and replacement presents a long-standing dilemma for tax professionals and our customers. In general (and most often optimally), it is expected that such repair, or even replacement, costs can be spent in the year in which they are incurred. But the analysis needed to determine what needs to be done isn't that simple, especially with the recent issuance of the Tangible Property Regulations by the IRS. Replacing an entire roof with a new one is considered an improvement.
The improvement must be capitalized and depreciated. The difference is that a repair is considered maintenance, such as repairing roof leaks or replacing shingles. Unfortunately, most insurance companies require you to pay a deductible every time the roof is repaired, every ten years. If you have had a roof leak, for example, it would be considered a repair, since there has been damage to a part of the roof that needs to be repaired.
Another important thing to remember is that most insurance companies will only cover the cost of repairing the roof without any additional improvements or upgrades. For the financial statements, insurance income net of the book value of the ceiling would be considered a gain for finance and the cost of the ceiling would be a new asset that would depreciate. However, if the average life of a roof is 25 years, you'd better get a new roof in this case.