In these tough economic times, we should all welcome any opportunity to save money where possible. As a homeowner, this is especially true regarding potentially costly expenses such as roof repairs, replacements, and maintenance operations. A great way to make such initiatives easier on your bank account is by taking advantage of tax deductions on your insurance policies. A tax deduction refers to the amount of money you, as the property owner, must pay out of your pocket towards the cost of work done on your property, as the insurance company covers the rest. If, for example, a roof replacement job costs $10,000 and your insurance policy qualifies you for a $2,000 deductible, then the insurance company will pay the remaining $8,000 once you have paid your share. Depending on the circumstances surrounding your case, such as state laws, the type of roof involved, and your insurance policy details, your eligibility and the deductible rates you qualify for might vary. To help you understand the often-complex workings of the tax system in this area, we will explore the different scenarios that determine whether or not your roof replacement is tax deductible and how you can optimize your chances of saving money.
Casualty Deductibles
The most common causes requiring roof replacements are what the insurance industry refers to as ‘perils.’ The perils that might damage your roof include unexpected events such as windstorms, hailstorms, hurricanes, fires, meteorite strikes, etc.
The dangers that might qualify you for a tax deduction on your roof will depend on the specific insurance policy you subscribe to. To determine whether or not you are eligible for a tax deduction, you will need to go over your policy in detail and find out what is covered and what isn’t before filing your claim with the Internal Revenue Service (IRS).
Depreciation Deductibles
If you decide to replace the roof on a property you own that is not your primary residence (you are renting it out to a tenant), it will likely not be tax deductible.
The IRS only caters to roof repairs in this instance. You will, however, have the opportunity to deduct the replacement cost over several years under the IRS-approved depreciation protocols.
In most cases, the claims can be carried over for about 2 to 7 years. However, it may extend up to 40 years, depending on the particulars of the property in question and the payment plan you agree upon with the tax authority.
Tax Deductions Through Home Improvement Tax Credits
The United States federal government instituted the Home Improvement Tax Credit program to encourage property owners to make their homes more energy-efficient to help conserve the environment.
This incentive works by offsetting and deducting the changes’ costs from their annual tax returns. The factors that make you eligible for these tax credits as you replace your roof include the following:
- The house in question should be your primary residence, meaning you live in it and do not offer it for rent.
- The roof you intend to install is made out of ENERGY STAR-certified material. Due to their minimal heat-gaining properties, these materials also must make the property more energy-efficient and environmentally friendly relative to other options. Such materials may include certified metals and certified asphalt (with cooling granules or pigmented coatings)
- The roof in question will be eligible for a tax deduction if it is made out of ENERGY STAR-certified roofing metals that optimize energy efficiency by reflecting heat rather than absorbing it.
Remember that tax credits are NOT equivalent to loans or rebates, meaning that you do not stand to receive cash back after paying for the job’s costs and that the eligibility conditions may change from year to year.
If you qualify for a roof replacement tax credit, you must fill in the Residential Energy Credit form provided here after submitting your tax returns to the IRS.
Other Tax Deduction Opportunities
In certain states, you may also qualify for significant tax deductions if your property fulfills the following conditions:
- Part of the house is being rented out to a tenant, allowing you to file the roof replacement costs as rental expenses.
- Part of your home is being used as office space, dedicated exclusively for use by a legally registered enterprise.
Final Thoughts on Determining if Your Roof Replacement is Tax Deductible
The tax code covering real estate matters in the United States can be complex and challenging to navigate for the average homeowner, so it is always advisable to seek expert advice from your tax accountant or an enrolled tax agent.
That said, you should only hire experienced, qualified, dedicated, and cost-effective roofing specialists to handle your roof replacement projects.
If you’re in Grand Rapids, Michigan, and require the services of trusted professionals for all your roofing needs, make Moore And Sons Roofing your first choice. You won’t regret it!
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