Can you capitalize a roof replacement, and how is it depreciated?
Short answer. Yes. Under IRS rules a full roof replacement is generally a capital improvement that is capitalized rather than deducted, and on a residential rental it is depreciated over 27.5 years starting when the new roof is placed in service. On your own home it is neither deducted nor depreciated, but its cost adds to your basis, which can reduce taxable gain when you sell.
This is general information, not tax advice, so confirm the treatment with a tax professional.
What goes into the capitalized cost
- The contract price for tear-off, materials and installation.
- Decking replacement, flashing and ventilation done as part of the project.
- Permit fees and related costs needed to complete the job.
Keep the contract, invoice and proof of payment, and ask for an invoice that separates any unrelated repair work.
On a residential rental
- Recovery period: 27.5 years, straight line, using the mid-month convention for the month the roof is placed in service.
- No bonus depreciation: a roof is a structural component of the building, so it generally does not qualify.
- The old roof: a partial disposition election can let you write off the remaining undepreciated basis of the roof being replaced, if that basis can be established. The election has timing rules, so raise it with your preparer in the year of replacement.
Other property types
- Nonresidential buildings: depreciated over 39 years. Roofs on nonresidential real property can qualify for a Section 179 deduction, but that does not extend to residential rentals.
- Home office: if part of your home is used for business, the business share of a new roof may be depreciable.
On your own home
The cost of a new roof is added to your basis. If insurance paid for the roof after a storm, the proceeds and casualty rules change how basis is adjusted, so bring the settlement paperwork to your preparer. See roof replacement cost in Georgia and roofing warranties explained.