Rental Roof Replacement

[MJ116]

I replaced the roof on my rental property Fall, 2023.  I know that the cost is supposed to be amortized over a number of years however, I am selling the property this year, 2024.  How do I get the full write off of the roof since I will not have it to deduct in the years ahead?  Can I include it in the Repairs cost?

[Vanessa A]

No, you cannot claim the roof as maintenance. The only way to deduct the full cost of the roof in 2023 would be to take a Section 179 deduction. However, if you did this,  you would have to recapture the depreciation when you sell the house in 2024 so you really would not see any tax benefit outside of 2023, then you would be paying it back in 2024. 

[MJ116]

So, the only benefit I will realize will be when I sell the house and use the roof replacement it in figuring cost basis, correct?

[Carl]

A new roof becomes "a permanent physical part of" the structure. Therefore it's classified as residential rental real estate and depreciated over 27.5 years.
Understand that depreciation is "NOT" a permanent deduction. When you sell the property, all prior depreciation taken must be recaptured in the tax year of the sale. You are taxed on that depreciation anywhere from 0% up to a maximum of 25%.  Even if you did not depreciate an asset, then you must still recapture and pay taxes on the depreciation you "should" have taken. Two things can happen in the tax year you sell the property.

1)Recaptured depreciation is added to your AGI. This has the potential to bump you into the next higher tax bracket. Weather it does or not depends on the numbers. Chances are, a gain realized from the sale may knock you up a bracket. But like I said, it all depends on the numbers.

2) Recaptured depreciation is taxed as ordinary income anywhere from 0% to a maximum of 25%. It depends on your AGI.