How do you depreciate a new roof on a rental property?
Short answer. A new roof on a rental is generally a capital improvement, so you set it up as its own asset and depreciate it straight-line over 27.5 years starting the month it is placed in service. Small repairs, like replacing a few shingles, are usually deducted in the year paid instead.
Improvement or repair?
The IRS tangible property rules ask whether the work betters, restores, or adapts the property. Replacing an entire roof generally restores a major component of the building and must be capitalized. Patching leaks, replacing damaged shingles, or resealing flashing is usually a deductible repair.
Setting it up on the return
- List the roof as its own asset with its cost and placed-in-service date.
- Use the 27.5-year residential rental class, straight-line, mid-month.
- Consider the partial disposition election to write off the old roof's remaining basis.
- Keep the invoice and proof of payment.
Safe harbors that may help
- Small taxpayer safe harbor: if your average gross receipts are $10 million or less, the building's unadjusted basis is $1 million or less, and your total repairs and improvements on it for the year stay within the lesser of $10,000 or 2 percent of that basis, you may deduct them. This rarely covers a whole roof.
- De minimis safe harbor: lets you expense items up to $2,500 per invoice or item if you elect it, which is useful for small repairs.
When insurance paid for the roof
If a storm claim funded the roof, the insurance proceeds and the old roof's remaining basis change the math, and a gain may be possible. Bring the claim estimate and payment letters to your preparer along with the invoice.
This is general information, not tax advice. On the claim side, see recoverable depreciation on a roof.