Are you considering a new roof for your home or business? One of the questions you may have is whether or not your new roof is tax-deductible. In this post, Deschutes Roofing, a renowned roofing repairs contractor, will discuss what types of roofs are eligible for deductions and any other factors that should be considered.
More About Roofs and Tax Deduction
A tax deduction is a reduction in the amount of income that is subject to taxation. Individuals or businesses that qualify for certain deductions can reduce their taxable income and realize savings on their annual tax bill.
When considering the tax consequences of installing a new roof, an individual or business must understand the eligibility criteria, which are discussed below:
- Commercial Roofs. A business may be eligible for deductions if the roof is used to generate income. The deduction must be related to roofing repairs, maintenance and other specific upgrades crucial to the property’s improved performance and reduced environmental impact.
- Residential Roofs. Homes have fewer deductibles than commercial properties. Generally, the Internal Revenue Service (IRS) has no deductions on repairs and maintenance of personal properties. However, some exceptions or special circumstances may apply, including home-based businesses and energy-efficient upgrades.
Determining New Roof Tax Deductibility
The answer to this question depends on various factors and specifics related to the roof. Although some types of roofs may qualify, it is important to understand which types are eligible for deductions, as well as other items such as homeowner status, tax year and the purpose of the replacement.
- Homeowner Status. The homeowner status of the individual or entity responsible for paying taxes plays a role in determining what types of deductions may be available. For instance, an individual filing as a non-resident will not qualify for tax deductions for residential repairs and maintenance, such as upgrading to seamless gutters. Similarly, businesses must properly report income related to property repair or maintenance costs to realize deductions.
- Types of Roofs. The type of roof being installed will also play a role in determining if it is deductible. For example, energy-efficient materials may be eligible for deductions and credits that traditional roofing materials do not necessarily qualify for.
- Tax Year. The tax year when the roof replacement took place also affects whether or not it can be deducted. For instance, if an upgrade including seamless gutters was completed in December 2019, but the taxpayer does not file that income until 2020, deductions may be seen in one tax year versus another.
- Other Factors. In addition to the factors already discussed, certain variables, like the cost of the roof and the age of the materials, may be considered in determining eligibility for a tax deduction.
Qualifying Factors for Tax Deduction
Tax deductions are available for individuals and businesses in certain scenarios. These include the following:
- Cost of the Roof. The cost of the roof plays an immense role in determining deductibility. The IRS will generally not allow for deductions on repairs and maintenance of personal property, so any improvement must meet certain criteria to be considered tax-deductible.
- Age of the Roof. Local governments will consider the age of the roof when determining if it is tax-deductible. Generally, any upgrade that adds value to the existing structure will be deductible, whereas an item such as a seamless gutter being replaced due to disrepair will not qualify.
- Purpose of the Roof. The purpose of the roof is vital when it comes to taxation. Roofs that provide for an operational business or make energy-saving upgrades may be eligible for deductions. For instance, adding insulation and other energy-efficiency features in a commercial property may reduce taxable income.
Tax Credits for Energy-Efficient Roofs
As previously mentioned, the IRS offers incentives for energy-efficient improvements. You may qualify for a tax credit if you make certain qualifying upgrades, such as higher R-value insulation and solar panels. Some roofing projects may be eligible for up to a 30% reduction depending on the materials used and other factors.
How to Claim a Tax Deduction
To take advantage of a tax deduction or credit, you must first meet the specific criteria. In addition, proper forms and records must be maintained for deductions to be applied correctly.
- Know the Tax Laws. It is crucial to understand the rules and regulations concerning taxes before making any decisions. It is best to speak with a certified accountant to determine what applies to you and your home or business.
- Keep Records of Your Purchases. Maintaining detailed records of purchases throughout the project will be beneficial when filing for deductions or credits. Make sure to keep all documentation from property improvements, such as receipts and invoices from a seamless gutter upgrade, in a secure place that is readily accessible.
- Use the Right Forms. File your tax deductibles using the right forms. The IRS has specific requirements depending on the type of deduction or credit you are attempting to claim, so following all instructions in detail is necessary.
Depending on your property’s categorization, you’ll most likely use one of these forms. Form 1040 is typically for individuals filing taxes. Businesses must use the Schedule C form to declare properties generating extra income. Those looking to claim a tax credit should use IRS Forms 5695 or 8839, depending on the type of improvement being made.
Count on Deschutes Roofing & Insulation!
Deschutes Roofing & Insulation offers our full range of services to both homeowners and business owners. We have a highly trained team of steep-slope and flat roofing experts. Whether you need a roof repair or replacement, new gutters or ice and snow removal, get in touch with our team. With five offices located throughout western Oregon, we have a crew that serves your neighborhood.
You can also rely on our team to provide insight into the tax implications of certain improvements while also answering any additional questions you may have concerning home improvements. Call us using the following numbers: (541) 313-5944 (Bend), (503) 967-9590 (Portland), (541) 246-6860 (Eugene), (503) 468-7663 (Lake Oswego) and (503) 928-8750 (Beaverton). You can also use this contact form to reach us.