Roofs Now Classified as an Expense Under New Law
In the recently enacted Tax Cuts and Jobs Act, there are some clear advantages for commercial real estate owners under the new law’s expansion of Section 179 of the IRS tax code. Certain changes allow taxpayers to deduct the full purchase price of specific types of property on their income taxes, rather than capitalizing the cost of the property.
Section 179 Overview
Section 179 allows a taxpayer to choose to expense the cost of an asset without capitalizing it first, unlike bonus depreciations which allow a taxpayer to first capitalize and then depreciate an asset. In the past, the Section 179 deduction was limited to taxable income derived from the business, without the ability to carry forward any deduction in excess of the limitation.
Section 179 expenses were largely limited to improvements made to the interior portion of a nonresidential building. Further, the improvements had to have been made more than three years after the building was first placed in service. Section 179 expenses were limited to approximately $500,000 in 2017 and limited to tangible personal property, computer software, or upon election, qualified leasehold, restaurant or retail improvements.
New Law
The expanded Section 179 provisions make the following types of building improvements – which would not previously have met the definition of qualified improvement property because they are improvements made to a structural component of a building – eligible for an immediate write-off:
- Commercial roofs
- Heating, ventilation and air-conditioning (HVAC) property
- Fire protection and alarm systems
- Security systems
The best part? The new law doubles the current dollar limitation on the amount that can be expensed each year from $500,000 to $1 million, with the phase-out deduction increased to $2.5 million. All provisions are effective for property placed in service in 2018.
Time for a Roof Replacement?
This is great news for building owners who have put off replacing their roofs because roofs now meet the definition of eligible property to qualify for the Section 179 deduction. As a new roof is replaced, keep in mind that any other rooftop equipment such as HVAC or company-specific items will be included in the total dollar amount.
As you look to the year ahead, you may want to consider the more advantageous tax advantage of roof replacement. We are happy to answer any questions you may have regarding roof repair or replacement.
Roberts Roofing Company has been a leading provider of innovative commercial and industrial roofing solutions in Cleveland, Ohio since 1981. We provide commercial repair, replacement and maintenance to serve companies of all sizes in Ohio and the surrounding region, offering a combination of technical expertise, custom solutions and quality workmanship to every project.
To find out more about selecting a commercial roofer in Cleveland, Ohio, simply fill out the form on this page and a member of our team will be in touch. Or, you may call us at 440.745.8578.