When it comes to roof repair, the distinction between maintenance and capital expenses is an important one. While repairing a roof may have been considered a maintenance expense in the past, the necessary roof replacement has become a capital expense. Maintenance work can be converted into capital improvements, and replacing an entire roof with a new one is considered an improvement that must be capitalized and depreciated. The difference between repair and replacement is that repairs are considered maintenance, such as fixing 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. It's also possible to improve the original value of the roof by changing the grade of the materials used. For example, opting for a metal roof instead of a tile roof or PVC instead of EPDM on the commercial side 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.