Your New Roof and Taxes
If you have just looked into replacing your roof, or already made the investment, you may well wonder if you get a tax break. A new roof comes at a substantial cost. Some online articles point to the fact, that since a new roof is actually considered a maintenance issue, the answer is no. Maintenance and repairs are necessary improvements to keep your home sound and habitable. However, there are exceptions.
Can Your New Roof Be Tax Deductible?
According to Consumer Reports, as part of the Bipartisan Budget Act passed by Congress in early 2018, they extended tax credits for energy-efficient upgrades made by homeowners.
- Roofs (Metal and Asphalt)
- Roofing materials that meet Energy Star requirements reflect more of the sun’s rays and can lower roof surface temperatures by up to 100° F. Qualifying roofing materials include metal roofs with appropriate pigmented coatings and asphalt roofs with appropriate cooling granules.
- Tax credit: 10 percent of the cost, not including installation, up to $500.
Can A New Roof Be Claimed on Taxes?
The answer is still no, if the new roof is on your personal residence or vacation home, as the issue of maintenance remains the same. Upgrades and home improvements add to the cost basis of your home and can reduce your capital gains when you sell your home. The IRS goes into some detail when discussing the cost basis of assets and how depreciation comes into play.
If the new roof is going on a rental property that you own, you are allowed to deduct repairs and maintenance, as business expenses.
Will My Property Taxes Increase?
Another concern voiced by homeowners is how a new roof could affect your property taxes. Some of the same rules apply. Since a new roof is categorized as maintenance, it does not increase the value of your home, per se. So, the answer would be no.
If you use materials that are considered an improvement and add value through energy savings, like the Energy Star improvements, technically, it could increase your property taxes. Changes in property taxes are often triggered by the pulling of permits. However, when it comes to a roof, most municipalities will consider the roof as maintenance, even if you add energy efficient materials that are technically an improvement over your old roofing materials.
One area where you will want to be sure and check in with is your home owner’s insurance policy. A new roof will not raise your rates, but it can factor in to your policy if you have a replacement cost element to your policy. You agent will want to know when the roof was replaced and how much it cost.
Remember, a new roof is a big investment. Be sure to notify your accountant and your insurance agent. They can help you manage important aspects of safeguarding that investment!
If you would like to talk to one or our professionals about roof replacement questions or want to schedule an appointment with a Booth and Little professional, give us a call today in Marin at 415-924-2733 and in Sonoma at 707-586-2656.