Does a new roof qualify for bonus depreciation?
Why roofs are left out
Bonus depreciation lets a business deduct a large share of an eligible asset's cost in the first year. Eligibility is tied to a recovery period of 20 years or less, plus a category called qualified improvement property. A roof fails both tests: it is a structural component of the building, and qualified improvement property covers interior improvements to nonresidential buildings, not roofs. Whatever the bonus percentage is in a given year, the roof does not qualify.
What about Section 179?
Section 179 expensing can cover roofs, but only on nonresidential real property, such as an office or store you own. Residential rental houses do not qualify. The annual limits change, so check current figures with your tax preparer.
What a landlord can do instead
- Depreciate the new roof over 27.5 years, starting the month it is finished
- Consider a partial disposition election to write off the old roof's remaining basis
- Deduct true repairs, such as replacing storm damaged shingles on part of a roof, in the year paid when they qualify as repairs rather than improvements
When insurance paid for it
If a storm claim covered the roof, the insurance proceeds also enter the calculation, through any casualty gain or loss on the old roof. Keep the adjuster's estimate, the payment letters and the itemized final invoice; they are what your preparer needs. For the insurance side, see how insurance pays a roof claim.