Roof replacements are an expensive, but often necessary, expenditure for homeowners and businesses. Accessing some tax benefit, such as a deduction, credit, or rebate, for replacing a roof helps ease the financial burden. If you own a residential home or commercial building in Central or Southwest Florida, you need an answer to the question, “Is a roof replacement tax deductible?” before moving forward with a roof replacement. That way, you will not miss out on an opportunity to receive a valuable tax incentive.
Understanding Tax Benefits Available To Homeowners And Businesses
The two primary vehicles for federal income tax incentives to taxpayers are deductions and credits. Tax deductions enable taxpayers to lower their taxable income and reduce tax liability. Decreasing taxable income can move a taxpayer from one income tax bracket to a lesser one with a lower tax rate.
A tax credit reduces a taxpayer’s tax liability dollar for dollar. If a taxpayer owed $5,000 in federal income tax but also was entitled to receive a $2,000 federal tax credit, the taxpayer’s federal tax liability would decrease to $3,000. Most taxpayers prefer to receive a tax credit over a tax deduction.
Is A Roof Replacement Tax Deductible For A Homeowner?
Generally, a roof replacement is not a tax-deductible event for federal income tax purposes. Home improvements or upgrades are not considered deductible expenses since they increase the value of your home and property. Typically, a roof replacement is classified as a home improvement.
Is A Roof Replacement Tax Deductible For A Commercial Building Owner?
As part of the Tax Cut and Jobs Act (TCJA), Section 179 of the IRS Tax Code (Internal Revenue Code) allows businesses to deduct the purchase price of qualifying improvements, including a commercial roof replacement, in the year in which the modification was made, as long as the roof is placed into service in the same year.
In 2024, the Section 179 federal tax deduction limit increases to $1,220,000. Thus, a business can deduct the cost of a new commercial roof up to this threshold amount. Moreover, the initial cost of the current roof, less accumulated depreciation, may be written off in the year the new roof replaces the existing one.
Note that the bonus depreciation under this provision will decrease from 80% to 60% in 2024. In 2025, it will further reduce to 40%. In 2026, it will become 20%. In 2027 and thereafter, no bonus depreciation will be available for businesses. This sunset provision underscores pursuing a roof replacement sooner versus later.
For example, if your business replaced its roof for $100,000 in 2023, it can deduct 80% of the cost, or $80,000, on its 2023 federal income tax return. If, instead, your business replaced its roof for $100,000 in 2024 (i.e., waited an additional year), it can deduct only 60% of the cost, or $60,000, for 2024 federal income tax purposes.
Hiring A Knowledgeable Contractor For A Residential Or Commercial Roof Replacement
Central and Southwest Florida homeowners and commercial property managers know they can trust Alan’s Roofing for all their residential and commercial roofing needs. As the most experienced roofing company in Central Florida, we offer peace of mind that the roofing work will meet or exceed your expectations – every time.
At Alan’s Roofing, we don’t compromise on craftsmanship or roofing products. We set a standard of excellence that permeates every aspect of our business approach to your roofing project. If you need a residential or commercial roof replacement, contact Alan’s Roofing to arrange a consultation and receive a free, no-obligation quote.