Is a new roof deductible for capital gains tax?

How basis works

Your basis is roughly what you paid for the house plus the cost of improvements. Gain is the sale price, minus selling costs, minus basis. A $16,000 roof raises basis by $16,000, which reduces the gain by the same amount.

The home sale exclusion

If you owned and lived in the home as your main residence for at least two of the five years before the sale, you can generally exclude up to $250,000 of gain, or $500,000 for married couples filing jointly. Improvements like a roof matter when:

• You have owned the home a long time in a rising market
• You do not meet the two-year tests
• The property was partly rented or used for business

What counts and what does not

• Counts: a full replacement, a new layer of decking, added ventilation, gutters installed with the roof.
• Does not count: repairs that keep the roof working, such as replacing a few shingles or a pipe boot.

If insurance paid for the roof

After a storm claim, the casualty rules adjust basis: insurance reimbursements reduce basis and the cost of restoring the property increases it. In practice, what you paid yourself is what usually adds value to your basis. Give your tax preparer the claim paperwork; IRS Publication 547 covers the details.

Keep the records

Keep the contract, final invoice, proof of payment and permit for as long as you own the home, plus several years after the sale return is filed.

This is general information, not tax advice. For the claim side, see roof replacement claims and ACV vs RCV.