Exploring the Deductibility of Roof Replacement Expenses

Homeowners often ask whether a roof replacement is tax deductible. The local, state, and federal income tax codes contain many complex (and confusing) provisions for the average taxpayer. Without expert guidance, homeowners are left to guess whether pursuing a particular home improvement (like a roof replacement) provides a tax benefit (i.e., deduction, credit, or other provision).

Understanding Tax Benefits For Homeowners

Many local, state, and federal tax advantages exist for observant and discerning homeowners. For example, most homeowners can deduct the following from their federal income taxes: home mortgage interest, home equity interest, HELOC interest, mortgage points, private mortgage insurance (PMI), and state and local tax (SALT) deductions. Naturally, the benefit depends on the homeowner’s income tax bracket.

As a reminder, a state or federal tax deduction reduces the amount of income subject to state or federal taxation. Suppose a taxpayer has a taxable federal income of $60,000 for a given year. In that case, a $2,500 tax deduction reduces their taxable federal income amount to $57,500 for that year. The taxpayer would then pay a tax commensurate with the corresponding federal income tax bracket.

On the other hand, a tax credit directly reduces the amount of state or federal income tax owed dollar-for-dollar. Imagine a taxpayer has a taxable federal income of $60,000 for a given year. If the taxpayer owed $13,200 in federal income tax but received a $2,500 tax credit, their federal income tax liability would decrease to $10,700. Generally, a tax credit yields a larger net benefit than a tax deduction.

Is A Roof Replacement Tax Deductible?

Unfortunately, most home improvement costs (including a roof replacement) do not offer the homeowner a state or federal tax deduction. While many home improvement expenses can raise the basis (i.e., adjusted basis) of a homeowner’s home and property, realistically, a roof replacement generally does not yield an immediate tax benefit.

If the roof replacement qualifies as a home/capital improvement under the Internal Revenue Code, the homeowner could take advantage of an increased basis (i.e., adjusted basis) at the time of the home’s sale. This adjusted basis is subtracted from the home’s sale price to calculate the capital gain (including any federal tax obligations).

Moss finished roof on Brick Home

What Tax Benefits Exist For Roofing Projects

Starting January 1, 2023 (and continuing through December 31, 2032), a federal tax credit exists for homeowners up to $3,200 annually for specific energy-efficient home improvements outlined under the Inflation Reduction Act 2022. A broad selection of Energy Star-certified equipment is eligible for federal tax credits.

For any combination of home envelope improvements (including the installation of windows, doors, skylights, insulation, electrical, furnaces, boilers, and central air conditioners), an aggregate tax credit of up to $1,200 annually enables homeowners to take advantage of the purchase of a qualified Energy Star-certified product.

With respect to home envelope improvements corresponding to a home’s roofing system, two federal tax credits are worth noting:

For any bulk insulation material purchase or acquisition of any product that air seals/reduces air leaks, a homeowner can claim 30% of the product cost up to $1,200 for a given year. For example, if the homeowner bought and installed rolls of bulk insulation, weather stripping, and caulk designed to air seal, they may claim 30% of the total price they paid for these items up to $1,200.

Note that the homeowner cannot claim the labor cost (i.e., the expense to hire a roofing contractor) to install these qualified energy-efficient home improvements. However, the homeowner could purchase these and other eligible products annually over several years between 2023 and 2032 and still receive a federal tax credit for their purchases in the respective year for which they made each purchase.

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This tax credit is available to homeowners who install a skylight that meets the Energy Star Most Efficient criteria. A homeowner may deduct 30% of the product cost of the skylight up to $600 annually. The homeowner must also factor in any other home envelope purchase since the aggregate annual limit is $1,200 (as far as a federal tax credit under this program).

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Hiring The Right Contractor For Residential Roofing Projects

For homeowners in Indianapolis (and surrounding areas), Moss Roofing offers the finest residential roofing services available. Over the past three decades, we have consistently met the needs of homeowners by delivering roof repair and replacement solutions (including proper attic ventilation and insulation) that protect your home securely and permanently.

Our commitment to exceptional craftsmanship and unsurpassed roofing products ensures you receive the highest quality results. If you have roofing questions or need a free consultation (or estimate) to learn more about our services, contact us today to schedule an appointment. At Moss Roofing, we look forward to assisting you with any residential roofing needs.

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