Can you take bonus depreciation on a roof replacement, and what can you write off instead?

Option 1: Write off the old roof

When you tear off a roof you have been depreciating, its remaining undepreciated cost does not have to keep dragging along on your schedule. A partial disposition election lets you deduct it in the year of the replacement. You need a reasonable way to figure the old roof's original cost, such as the original invoice or another method the rules allow.

Option 2: The small taxpayer safe harbor

If the building's unadjusted basis is $1 million or less and your average annual gross receipts are $10 million or less, you can elect each year to deduct repairs, maintenance and improvements on that building when the year's total is no more than the lesser of $10,000 or 2 percent of the building's unadjusted basis. A modest roof on a smaller rental may fit, but the total counts all work on that building for the year.

Option 3: Repair instead of replace

If storm damage is limited to some slopes and the insurer pays a slope repair, that work may be a deductible repair rather than a capital improvement. Replacing the whole roof covering is generally treated as an improvement.

Where insurance fits

Insurance proceeds for a rental roof are weighed against the damaged roof's basis to figure any casualty gain or loss, which interacts with each option above. These rules are technical, so bring the adjuster's estimate, the payment letters and the roofer's invoice to your tax preparer. For the insurance side, see ACV vs RCV.