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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David E. Du Val, EA
Chief Compliance Officer for TRI Holdco

 

Dave Du Val, EA, is Chief Compliance Officer for TRI Holdco. Inc., the parent company of TaxAudit, and Centenal Tax Group. A nationally recognized speaker and educator, Dave is well known for his high energy and dynamic presentation style. He is a frequent and popular guest speaker for the California Society of Tax Consultants, the California Society of Enrolled Agents and the National Association of Tax Professionals. Dave frequently contributes tax tips and information to news publications, including US News and World Report, USA Today, and CPA Practice Advisor. Dave is an Enrolled Agent who has prepared thousands of returns during his career and has trained and mentored hundreds of tax professionals. He is a member of the National Association of Tax Professionals, the National Association of Enrolled Agents and the California Society of Enrolled Agents. Dave also holds a Master of Arts in Education and has been educating people since 1972. 


 

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