Can I claim a new roof on my taxes?

February 17, 2016 by Dave Du Val, EA
Roof on brick house

Hey Dave,

I spent 30K on a new roof last winter after my old one collapsed under 100 inches of snow. I’m planning to sell it in a few years and move to a warmer climate.  Where do I report the cost of the roof on my taxes?

Dominick

 

Dominick,

In general, the cost of a new roof on your personal residence would not be an expense you are allowed deduct on your current year’s tax return. Instead, it adds to the “cost basis” of your home, which is generally the amount you paid for it, plus costs from your purchase transaction and other improvements (not minor repairs such as replacing a leaky faucet) you made on the home over the years.

That said, and depending on the circumstances, you may qualify for a Casualty Loss Deduction for any roof costs not already covered by insurance. This may apply if the roof collapse was sudden, unexpected and unusual, rather than caused by the progressive deterioration of the roof over the years.

When you sell your home you will have the opportunity to recover the cost of the roof. The expense will reduce your capital gain (or increase your loss), which will be the amount you sell the home for minus your cost basis. You should not include general repairs in your cost basis calculation, but only work that increases your home’s value, such as a new kitchen or the addition of a new room. All of the above assumes, of course, that this is your personal residence. Different rules apply to rentals and business property.

Keep in mind, too, that if you did receive a payment from your insurance company for the roof collapse, the amount you received will reduce your cost basis in the home. For additional information about calculating your home’s cost basis as well as any allowable Casualty Loss Deduction, please refer to IRS Publication 551, Basis of Assets and IRS Publication 547, Casualties, Disasters and Thefts .

Deductibly Yours,

Dave

 

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Rhonda D. Guillory, EA
Learning and Development Manager

 

Rhonda was a Seasonal Tax Return Reviewer at TaxAudit before joining the permanent staff as an Audit Representative in 2009. She has a Bachelor of Science in Computer Science and worked in the Information Technology field for 15 years before making a career change. Since transitioning to the field of income tax in 2003, she has prepared and analyzed hundreds of tax returns. Rhonda enjoys helping taxpayers and tax professionals learn and understand the fascinating world of income taxes. Currently, she is the Learning and Development Manager.


 

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