Safe Harbor for Small Taxpayers - can I split my 19k repair into two years and qualify

[DumbDadLTG]

I'm mainly mainly looking for input as to whether IRS will allow this or if it will attract undesirable IRS attention. 

I have 18k roof repair quote that looking if there might be an opportunity to split between two years and still qualify for direct expense reduction (vs Deprec) - each of those years  (I meet the other requirements and used SHFST last year)

There could be a legit need for this:  for example, if I want my roofer to order my materials now (maybe save a material price increase in the coming year) and then do the actual work after rainy season....say May, 2026 (So Cal).

Before if I ask my roofer if he would do this and invoice me in this way, I'm asking forum/experts, would it be allowed?

Thanks in advance for review/response.

@DianeW777 

[AmeliesUncle]

I would first ask you to double check that you could qualify for that election:

1) Is the Unadjusted Basis of the property between $450,000-ish and $1,000,000?

2) Do you have any other repairs, maintenance or improvements?  It only applies if the TOTAL of ALL repairs, maintenance and improvements for the year are under the 2%/$10,000 rule.

If you meet the rules, it seems to me that it would work.

[DumbDadLTG]

Yes I meet the other requirements. I would be close (have to keep the other expenses low next year), but the fact that I'm close is reason for asking.....in case i need to try and get the partial invoice this year...else if do i next year, I definitely have to depreciate

[AmeliesUncle]

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@DumbDadLTG wrote:

...else if do i next year, I definitely have to depreciate

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Let's back up a second.  I should have asked this before I made my last comment.  TWICE you referred to it as a "repair", rather than an improvement.

If it truly is a "repair", there is no dollar limit.  It could cost a million dollars and it would be deductible.  

If it is merely replacing shingles and underlayment (not replacing rafters/trusses and minimal sheathing replacement), in SOME cases it may be a repair.

[M-MTax]

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@DumbDadLTG wrote:

...(I meet the other requirements and used SHFST last year)..

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Are you 100% certain you're going to meet the requirements for the SHST? Note that it's the lesser of 2% of the unadjusted basis OR $10,000 AND that is for the total amount paid during the taxable year for repairs, maintenance, improvements, or similar activities.

I have to assume that the $10,000 would apply here and you're trying to split $19,000 over two years, which is obviously $9,500 per year. Regardless of any other considerations, that only leaves you with $500 to cover other repairs, maintenance, and improvements and I would find it difficult to figure how you only have $500 or less in other repairs and maintenance alone. 

EDIT: You both beat me to the punch here. Sorry.

[DumbDadLTG]

very good point. hadn't considered that.

I think I'm looking at a standard reroof (every 10-20 years dependent on tile make up). They definitely replace the underlayment along with singles (because composite in my case) - the standard reroof process  (to my understanding) when existing covering has deteriorated to the point where underlayment will be exposed....and then soon deteriorate and leak. 

No rafter, truss,  or plywood work.

I'll ask my roofer more about the process.

Thanks!

[DumbDadLTG]

M-Mtax,

I understand the question. 

First, my quote is actually 17500, and I don't expect anything major at this point (furnace and water heater done in 2024). i live i So Cal so property is a little pricey and therefore 10k is the lower of the limits. I think I could take about 9k this year before hitting the limit leaving 8500 next year.

But AmeliesUncle got me looking further about Roof repairs. seems like most responses on internet search would lean towards Capital expense (depreciate), but throwing this out there in case either of you (or other Community members) can further opine, or possibly point to a credible source that  leans toward current expense.

I took ownership in 2020. Roof (asphalt shingles) approaching near end of its life but has held on. No leaks thus far and don't want to risk that so doing the work soon.

I relooked at the quote detail. It's simply a asphalt shingle overlay (they are not removing existing shingles - I recall now that you can do this once before having to remove shingles on future replacement (a weight issue). so no underlayment (paper) replacement......does that possibly impact classification? 

Thanks all

[M-MTax]

@DumbDadLTG 

I tend to agree with @AmeliesUncle on almost all issues that arise. The IRS does say the following in a Publication.

Example.

You repair a small section on one corner of the roof of a rental house. You deduct the cost of the repair as a rental expense. However, if you completely replace the roof, the new roof is an improvement because it is a restoration of the building. You depreciate the cost of the new roof.

HOWEVER, in my opinion (which counts only as that) I think the overlay changes the calculus here, After all, you're not tearing off the old roof and replacing it; you're just covering the existing roof with some new material as a remedial effort of sorts. Again, my opinion only is that you could go with a repair.

[AmeliesUncle · Accepted solution]

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@DumbDadLTG wrote:

I took ownership in 2020. Roof (asphalt shingles) approaching near end of its life but has held on.

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In my opinion, that is a "betterment" (improvement), not a repair.

I'll include a link below to an article that I frequently refer to in regards to roofs (if this forum doesn't delete the link).  Although in my opinion, their example for a "betterment" based on age is too aggressive (and keep in mind that even if you don't think it is a "betterment", there are several other factors that could make it an improvement rather than a repair):

https://www.thetaxadviser.com/newsletters/2017/jun/expensing-roofing-costs/

How much time elapsed between the building acquisition and the roof work?

1. Generally, if roof work needs to be done soon after the building was acquired (e.g., two years later) it might fall into the betterment category because the work corrected a material defect or condition that existed before the building was acquired.
2. However, if a long period of time has passed since the original building acquisition (e.g., seven years later) it generally does not fall into this category.

[DumbDadLTG]

Thank you. Yea I had found that article and was the most influential of those I was referring to "...most responses on internet search would lean towards Capital expense (depreciate)...." and was why I noted purchase date. Your response is helpful in knowing I'd like have problems categorizing as current expense. Waiting for my roofers response. Still thinking if materials fell in that 8500 range,SHFST might come in play. A little late in the year for this scramble, I know.

Thanks!