How do I depreciate a new roof for a rental property?

[grandpixel]

I put a new roof on my rental property last year. It cost me nearly $20,000 out of pocket. Supposedly, this cannot be counted as a business expense for a deduction. I'm supposed to depreciate it? Can you help me understand how this works? How does it work out in the end, considering I had to pay $20,000 out of pocket for a repair? Also, how would I input this in TurboTax Premier 2019?

[M-MTax]

Add the roof as an asset the same as if it was the rental property itself. The roof gets depreciated straight-line over 27.5 years. 

[grandpixel]

okay, doesn't really answer my questions though

[PattiF]

The IRS has assigned different depreciation rates to expenses for rental properties based on the life of the product. Appliances would be depreciated over 5 years, and a fence for 15 years.

A roof is depreciated for 27.5 years since it does not need to be replaced with the frequency of an appliance. The total that you paid will be divided by 27.5 and each year the depreciation expense for the roof will be deducted from the rental income.

Also see this article for more information:  Rental property 

The instructions for entering the information is found here: I have trouble entering new rental roof

[deean]

I would like to continue this question with a real life example to see if there is anyway to break the "new roof" into repair and improvement expenses.  We hired to repair wood damage on the facia and soffit and some tiles with new wood and tiles at a cost of $7500 initially.  I was planning to claim the entire $7500 as a repair.   It was determined about 2/3 through the project that the all the roof tiles should be taken off and a new composite roof added for $14000.  Is it possible to claim the facia and soffit wood work $7500 as a repair and the rest as a new roof $7500?

[Mike9241]

see this link. you will have to decide whether the $7500 is a repair or capital improvement. the following is only guidance. and it's not clear whether the project can be broken down between a repair portion and a capital improvement portion

https://www.dbbllc.com/newsletters/focus-our-tax-e-newsletter/irs-clarifies-capital-improvement-vs-r... 

[mjpb52]

1) If you add under type of asset as a J5 Qualified Replacement you have 15 year strait line.

2) So I guess capital improvement is the same as residential rental? since I do get the same result 27.5 year. Which happens to be the correct answer.

Unfortunately, in Florida a roof is only good for 12 years, since myself and all my neighbors need a new roof every 12-14 years or cancellation of property insurance.  So go figure trying to explain this to the Feds, when we have to recapture.

[AbrahamT]

It is what it is. The depreciation recapture rate will apply only to 12-14 years rather than 27.5 years. For a full discussion on depreciation recapture see  HERE. Chapter 3, Pg 27  Also HERE  Chapter 3, Pg 22 and  HERE  Notice 2013-59.

[deean]

The depreciation rate for a new roof seems to clearly be 27.5 years.   If the roof only lasts 12 years then the 27.5 depreciation rate still needs to be used for the first new roof expenses.  However when the roof is replaced with a second new roof in12 years I believe that the first roof asset is disposed off and the remaining first roof expenses (27.5 - 12 years of expenses) can be depreciated in that year.  I believe that the second roof will need to be depreciated at 27.5 years.  So in the same year that the second new roof is put on the house 1/27.5 x second new roof expenses can be depreciate.   My roof composite shingles have a 40 year life so I am expecting to get 27.5 years out of my new roof.

[AbrahamT]

That is correct. The cost basis less the salvage value divided by 27 and 1/2 years. The salvage value is defined as what you can get from this property after the entire depreciation period passes through. Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. And yes, the remaining first roof expenses can be depreciated in that year.

[leeloo]

@deean 

When repair are part of a greater improvement, the entire project is considered to be an improvement. Depreciate the roof over its 27.5 year useful life.

[leeloo]

@mjpb52 

A J5 Qualified Replacement is only for nonresidential. 

[HelenC12]

When you sell your rental building, you have to indicate the sale in TurboTax and also indicate that each asset is also sold. TurboTax will walk you through the sale of each asset. You would apportion your sales price to each asset (building and assets, i.e. roof). TurboTax will calculate a gain or loss on each asset. Also, TurboTax will also factor in Depreciation Recapture. 

• Depreciation expense is an item that landlords may not know about and the fact that when you sell your rental, you have to claim all the previous years’ depreciation expense. This is called Depreciation Recapture and it's taxed in the year of sale.  You may have to pay 25% on your depreciation recapture. See IRS Publication 544 Chapter 3 Depreciation Recapture, page 27.

A roof is a capital improvement that adds to the value of your rental property, prolonging its life, and must be depreciated over 27.5 years rather than deducted as a current-year expense. 

To enter your roof as a rental asset:

1. Sign into your TurboTax account.
2. Select Pick up where I left off or Continue.
3. Select Federal then Wages & Income from the left side menu.
4. On the Your income screen, scroll down to Rental Properties and Royalties (Sch E) and Edit/Add.
5. If you get to the Your 2022 rentals and royalties summary screen, Edit the property.
6. On the Here's XXX rental property info screen, scroll down to Assets. If you have other that are listed select Edit. 
7. On the Your improvements, furnishings, and other assets screen, select Add Asset.
8. On the Your Property Assets screen, scroll down and select +Add an Asset. 
9. On the Describe This Asset screen. select Rental Real Estate Property and Continue.
10. On the Tell Us About This Rental Asset screen, select Residential Rental Real Estate and Continue. 
11. Enter the roof information and Continue with the onscreen interview until complete.

Related Information:

• What kinds of rental property expenses can I deduct?
• What is rental depreciation and how does it differ from an expense?
• How do I handle capital improvements and depreciation for my rental?

@grandpixel 

[mjpb52]

Thank you all I do appreciate.  Our issue here in Florida is most shingle roofs have warranties, that are only as good as the last hurricane.  We have had no issues with an existing 14 year old roof, but there has been quite stringent requirements from the insurance companies and we were dropped back as of 2/1/22.  Most insurance companies are using any excuse to get out of the market in FL, and now it is unwritten but the existing life is now actually 12 years.  Tile is a big deal here although we are seeing a greater damage from the high winds, and the last hurricane totally decimated the South West Florida area.  We are all still reeling and trying to find help with Ian and declared a Federal Disaster but has not been declared as a "qualifying loss" . (if you don't itemize you lose, unsure though with a rental)

[rodmathiseb]

My turbo tax consultant is depreciating my roff over 5 years, not 27.5. Whats going on?