When the roofing system of a commercial property go awry, the owner has two options: repair the issue or install a new one. While the Internal Revenue Code renders commercial property repair expenses as tax deductible in the current year under, it does not cover capital improvements such as a new roof installation. Capital improvements are subject to recovery only through depreciation deductions over a period of 15 years. Therefore, the “type” of repair or maintenance plays a pivotal role in determining whether or not your investment in your property’s roofing system is tax deductible.
Understanding Current and Capital Roofing Expenses
Before moving any further, it is imperative to first understand the difference between current and capital roofing expenses. Tax authorities say that the cost of a new roof is a “capital expense”, whereas roof repair is a “current expense”. The Supreme Court of the United States has further clarified the parameters, stating any expense on a property that restores it to an operable condition, and does not increase its value or lifespan qualifies as a “current expense”. Any other expense, on the other hand, which enhances the property’s value, increases its lifespan, or helps it adapt to different users, goes under as capital expense.
Energy Efficient Roofing: A Current Expense
Energy efficient roofing is a type of preventive maintenance, involving a systematic approach to ward off common roofing problems, such as leaks, billowing, tenting, and blow-offs, before they become a graver problem and reduce the roofing system’s lifespan. As preventive maintenance only relates to restoring any roofing system to its prior condition, it falls under the category of “current expense”, thereby helping property owners take advantage of significant tax deductions. In fact, unless your old roof isn’t replaced or substituted with a new insulation, energy efficient roofing remains a current expense, even if it increases your property’s value.
Tax Deductions and Other Benefits
If you have an energy efficient roofing, you are entitled to receive a tax rebate of $2.40 – $4.00 per square foot. The Federal tax deduction for a tear-off replacement, on the other hand, stands to a maximum of $0.60. In addition, an energy-efficient roofing system also entails:
- Reduced power bills due to higher energy efficiency
- Improved indoor comfort due to even distribution of energy
- Increased lifespan of the roofing system
The Bottom Line
Due to the diversity in the materials, procedures, and concepts used by different commercial roofing contractors, choosing an ideal solution to common roofing issues may not be easy. Between the unlimited options at your disposal, you can either chose patching or tear off the old roof and go for a new installation altogether, when it comes to fixing roofing issues. Whichever road you choose, opting for energy efficient roofs is certain to deliver an array of benefits, besides the tax rebate offered by the US government. To learn about the benefits, feel free to get in touch with one of our roofing consultants. We’d love to hear from you!