Are Roof Repairs Tax Deductible?
You just cut a check to a roofing company and, a wise homeowner that you are, are looking for a way to get the most benefit from your expense. It’s only normal to wonder, “Are roof repairs tax deductible?” Like most tax-related questions, the answer isn’t as clear-cut as you’d like. There’s a distinction between home repairs and home improvements. Each is defined differently and, for tax purposes, it’s important to understand how each can and cannot be applicable.
What Are Home Improvements?
“Home Improvement” is a term most homeowners will hear more than once. Being able to distinguish between a home improvement and repair is not always straightforward, though. However, the definition is fairly clear and self-explanatory. Home improvement is any update on a residential building that contributes to its over life quality and usefulness. In general, home improvement projects tend to be larger jobs with bigger picture goals, such as a new HVAC unit or complete overhauls and redesigned spaces. The bonus on home improvements is their ability to increase the overall value of a home.
Most home improvement projects have some defining characteristics that include:
- Adapts an existing space or object for a new use
- Adds new space or objects that were not there before
- Upgrades an existing space or object
Some common examples of home improvements include:
- Roof replacements
- Kitchen and bathroom renovations
- Backyard landscape/hardscape
- Building onto an existing structure
- Window replacements
What Are Home Repairs?
Repairs can feel a lot like home improvements and, at times, there is some overlap to the term. In a more general sense, however, repairs are typically jobs that have a much smaller scope. In addition, they serve to help ensure a residential property remains in functioning order and is liveable. Most times, repairs are meant to restore an otherwise broken or dysfunctioning system within a home. It can add value to the home in some instances, but more times than not, repairs are more of a necessity than a clear investment to increase a homes’ sale price. Most times, repairs cost less than home improvements and don’t require a ton of overhaul since their typically smaller projects.
Some of the most common examples of home repairs include:
- Replacing a few roofing shingles, tiles, or repairing a portion of a metal roof
- Repainting a room or bathroom
- Replacing appliances
- Termite damage
- Installing new plumbing pipes
- Fixing a broken sink
- Mold repair
What Are Tax-Deductible Homes Updates?
All of this brings us back to our original question: are roof repairs tax deductible? As with most things tax-related, things can get blurry and very complicated. The quickest answer to this question is: it depends. Home improvements on a personal residence are generally not tax-deductible for federal income taxes. However, installing energy-efficient equipment on your property may qualify you for a tax credit, and renovations to a home for medical purposes may qualify as a tax-deductible medical expense. When it comes to the Renewable Energy Tax Credit, the IRS states “energy saving improvements” made to a personal residence before January 1, 2020 qualify for the credit, which is equal to 30% of the cost of the property installed. Your personal residence can include your primary home and a vacation home.
That said, there are some nuances to these rules. For instance, since home improvements generally improve the overall value of the home, you can file for a tax deduction for years following a big home improvement project. Home improvements must be deducted over a set depreciation schedule.
Are roof repairs tax deductible?
Given that a residential homeowner is attempting to restore something to its original state, home repairs are usually tax-deductible in the same year the work is completed. For example, if your roof repair cost $3000, you can save a certain percentage on your taxes in that same year. Yes, roof repairs are, therefore, tax-deductible. Types of roof repairs to account for include:
Leaky Roof Repair
The IRS treats repairs and home improvements differently. In the IRS’s eyes, a home repair is any expense made fix broken or deteriorating parts of your home. These expenses aren’t tax-deductible in any way. Fixing a leaky roof clearly falls under the tax man’s definition of a home repair, and won’t give you a break on your next tax bill.
Replacing A Roof: Nuances Explained
The IRS treats home improvements a little differently. Home improvement is an investment you make that improves the condition of your home, or brings it back up to the condition in which you purchased it. In most cases, putting a new roof on your home qualifies as a home improvement, which can help lower your taxes … but just not next April 15.
Further confusing matters, it’s not a deduction you can claim like your mortgage interest or charitable contributions. It’s considered part of the “basis” of your home (essentially, the cost of your home’s purchase plus the expense of all qualifying improvements), that’s used to tally your capital gains taxes when you sell your home. In briefest terms, if you spend $3,000 putting a new roof on your home, it makes your home’s cost increase by $3,000 in the eyes of the IRS.
Unfortunately, you’ll only be able to capitalize on this expense when you sell your home (so save all paperwork), and not in the year you pay for the roof. What’s more, homeowners don’t pay gains on the first $250,000 in profit of your home and double that if you file married. So unless your home appreciates more than $250,000 before you sell it, the cost of your roof improvement is meaningless.
Don’t scoff at the $250,000 mark! Colorado’s home prices are skyrocketing, and many homeowners who have been in a home for several years may be facing selling a home that exposes them to capital gains liabilities.
Are roof repairs tax deductible? There’s no quick and easy answer, but most homeowners (not owners of rental properties) are always best served holding onto documentation for improvements such as a new roof.