Can I use a special depreciation allowance for a new roof for a rental property?

mavmoses07 · ‎June 7, 2019

I own a condo that I rent out. At the end of last year the roof for the entire building was replaced. I input this information into Turbotax and it ask me if I'd like to use a special depreciation allowance and deduct the entire expense this year. From what I've read about this special depreciation allowance it doesn't seem like I should be able to, instead I should have to depreciate it over a period of 27.5 years. Can I use the special depreciation allowance?

Additionally I had the condo appraised last year in order to remove PMI (the condo has gone up significantly in value). I did not refinance. Is the cost for the appraisal deductible as an expense?

keithneargarder · ‎June 7, 2019

I understand some items like a new roof, remodel, etc. that you do once every 25+ years not qualifying, but how is it that a water heater (from my experience life expectancy of 10-15 years) and a furnace (life expectancy 15-20 years) not qualify? You will most likely be replacing them well before you have fully depreciated them.

MichaelDC · ‎June 7, 2019

No. The IRS has taken a very strong position that a new roof must be capitalized and depreciated.

You will report it as an asset depreciated over a period of time rather than deduct it a a current year expenses. (should be depreciated over 27.5 years , the same recovery period as of the property ) Also see answer from below and attached image ( the very last row of table 2.1 )

Please feel free to post any additional details or questions in the comment section.

https://ttlc.intuit.com/replies/4791833

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mavmoses07 · ‎June 7, 2019

Thanks! What about the condo appraisal?

MichaelDC · ‎June 7, 2019

If it was part of the closing cost for the purchase or a loan, those appraisal costs are also added to the cost basis of the property Thanks. Good Luck!

mavmoses07 · ‎June 7, 2019

It was not. I purchased the condo 8 years ago, turned it into a rental 5 years ago. I had the appraisal done to remove PMI only. I'm guessing it's not deductible?

MichaelDC · ‎June 7, 2019

Correct, normally these are either added to the basis or amortized over the life of a loan. However, there is an aspect of the appraisal fee that could be considered an ordinary and necessary 'expense' of doing business in this case. It seems a safer bet to handle it as usual and add it to the basis. Maybe someone else will chime in here on a $400 issue.

DianeW · ‎June 7, 2019

@mavmoses07 I agree with the assessment @TurboTaxMichaelDC provides for the usual procedure for an expense for an appraisal. However, since the appraisal saves money for you long term and therefore produces more rental income from the time the PMI is no longer an expense, I would be inclined to take the expense and be prepared with all the records maintained with your tax files should you need them later.

KrisD · ‎June 7, 2019

I agree with TurbotaxDianeW. If the appraisal fee was necessary for the purchase, it would be added to the basis, but since it was a fee to remove the PMI, I see it as a business expense for that purpose.

mavmoses07 · ‎June 7, 2019

Thanks for the help!

TSK2264 · ‎September 26, 2020

Since this was purchased 8 years ago, accelerated depreciation rules would not apply. However, for anyone that has been directed here from doing a similar search on the tax treatment of a new roof on a rental property, a new roof would qualify for accelerated depreciation if the property was put into service after 12/31/2017.

Can I use a special depreciation allowance for a new roof for a rental property?

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