Exploring the Tax Benefits of Roof Replacement: Is it Tax Deductible?
By

Many homeowners know federal, state, and local tax benefits may exist for particular home improvements. However, they may not understand which home renovations qualify for what kind of tax advantage. Homeowners may ask themselves, “Is a roof replacement tax deductible?” Answering questions like this involves a detailed analysis of how tax benefits function.

Is A Residential Roof Replacement Tax Deductible?

No. Emphatically, no. Typically, a residential roof replacement is considered a home improvement (assuming the replacement increases the value of your home and otherwise meets the federal income tax criteria for being a capital improvement). Generally, a home improvement is not deductible for federal income tax purposes.

However, not all hope is lost. A home improvement may raise your home’s basis (translating into your home’s adjusted basis). The basis is the price you paid for your home. The adjusted basis incorporates the basis plus any home improvements you make to your home during your ownership. When you sell your home, the adjusted basis may help reduce or eliminate any federal tax obligation you incur (depending on the difference between the sale price of your home and the adjusted basis).

Although installing a new roof may not generate a tax deduction, homeowners may qualify for a federal income tax credit of up to $3,200. This provision includes $1,200 for energy property costs and specific energy-efficient home improvements. Bolstering a home’s insulation or installing skylights may offer a tax credit. 

Understanding The Tax Benefit Terminology

A tax deduction lets you lower your taxable income for a given year. Assume you qualify for a $1,000 federal tax deduction, but your federal taxable income is $50,000. In this instance, your federal taxable income is reduced by $1,000 to $49,000. You would pay federal income tax on the $49,000 amount for your federal income tax bracket.

Concerning the example above, in all likelihood, the net financial benefit to you (in terms of the amount you owe in federal income tax) would be much less than a $1,000 federal tax credit. Most taxpayers express a much stronger preference for tax credits over tax deductions. However, the tax benefit available depends solely on what options

A tax credit reduces your corresponding tax bill, dollar for dollar. For example, if you qualify for a $500 federal tax credit but owe $3,500 in federal income tax, this credit reduces your federal income tax liability by $500 to $3,000. Most tax credits are classified as refundable or non-refundable. 

A refundable tax credit can help boost your tax refund if this credit exceeds the amount you owe in tax. For instance, if you qualify for a $1,500 federal tax credit but owe $1,000 in federal income tax, this credit reduces your federal income tax liability to $0. It enables you to receive a $500 tax refund.

Conversely, a non-refundable tax credit cannot provide you with a tax refund. In this case, if you qualify for a $1,500 federal tax credit but owe $1,000 in federal income tax, this credit reduces your federal income tax liability to $0. However, the remaining $500 federal tax credit cannot be refunded to you.

What Tax Benefits Exist For Homeowners When Replacing A Roof?

Two opportunities exist for homeowners to access a federal income tax credit when “resolving” roofing “issues.” The first avenue is an insulation tax credit of up to 30% of the product cost (with a maximum credit of $1,200 annually for addressing any combination of home envelope improvements (which includes windows, doors, skylights, electrical, and insulation)).

The insulation tax credit allows the homeowner to receive a federal income tax credit for purchasing and installing (but no tax benefit for labor) bulk insulation materials and/or products (i.e., weather stripping, caulk, house wrap, etc.) that reduce air leaks. Certain limitations apply, naturally.

The second avenue is a windows and skylights tax credit of up to 30% of the product cost (with a maximum credit of $600 annually for the skylight itself (and $1,200 annually for addressing any combination of home envelope improvements).) Any skylight must meet the Energy Star Most Efficient criteria.

Hiring A Qualified Roofing Contractor To Replace A Residential Roof (And Access Any Tax Benefits)

For homeowners throughout Kansas City, MO (and surrounding areas), Bill West Roofing provides unmatched customer service, exquisite craftsmanship, and phenomenal roofing products. We set the industry standard for residential (and commercial) roof repair, roof replacement, and gutter installation. 

Our knowledge and experience ensure you receive exceptional results and complete satisfaction. Since 1976, we have met the needs of homeowners throughout the area by offering high-quality roofing solutions at a competitive price. We don’t cut corners, and we don’t oversell our services or products.
To schedule a free, no-obligation appointment, contact Bill West Roofing today.

Related Posts

Scroll to Top