While repairing a roof would have been considered a maintenance expense, the necessary roof replacement has become a capital expense. Maintenance work can be converted into capital improvements. 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. In some cases, homeowners can deduct the full cost of roof replacement or repair from their taxes. An experienced tax advisor can help you determine if part or all of your roof replacement is tax-deductible. Obviously, you can “improve the original value by changing the grade of the materials (for example, by opting for a metal roof instead of a tile roof or PVC instead of EPDM on the commercial side), but you can also improve the original value by improving the grade of the material beyond the original value.
Thus, for example, if you replaced an entire roof with metal shingles instead of asphalt shingles, you would increase the original value and not take a necessary step to maintain the original value. It's essential to get multiple opinions on the condition of your roof and how it will be fixed or replaced. Sometimes a portion of the roof replacement deductible is tax-deductible, saving you money after the end of the calendar year. Be sure to ask about potential tax benefits and find out what deductible you'll have to pay when replacing your roof.
You may be able to contact your tax advisor to see if the roof replacement deductible is tax-deductible. However, if you are replacing an old roof with another type of material or shingles for any reason other than a natural disaster or accident, insurance will likely not reimburse. If so, the extension part of the roof is capitalized and, according to the facts, possibly the entire roof system. The choice usually comes down to how much it would cost you to repair your roof compared to replacing it.
Building owners often spend significant amounts to replace parts of various components of the roof system. A roof replacement that increases the value of your home must be capitalized and depreciated for many years to come. However, if the average life of a roof is 25 years, you'd better get a new roof in this case.
