It pays to ‘repair’ roof, not ‘replace’ it

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in Small Business Tax,Small Business Tax Deduction Strategies

Q: I own a residential real estate building that I bought in 1995. The building is 40 years old and needs a new roof. If I have a new roof installed this year, can I deduct the entire cost in 2004? M.S., Raleigh, N.C.

A: No. Because the new roof is a capital improvement, you must write off the expense over the same cost recovery period as the structure itself. So you must claim depreciation deductions over 27.5 years using the straight-line depreciation method. While you must depreciate roof-replacement costs over several years, you can write off the cost of roof repairs in the year you pay the bill. So, if possible, it's better to show that such work was a "repair," not a "replacement." (See 9/22/03 issue for six ways to bolster your case that roof work is truly a "repair.")

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