Can I deduct damage to my roof due to a major disaster?

[mtl7770]

Last year (2024), continuous heavy rains pummeled our area and damaged my home's roof.  I spent $25,000 to have the entire roof replaced.  Unfortunately, our **bleep**ty insurance would not cover it, so I had to spend the money out of my own pocket.

My home was purchased in Los Angeles in 2002 for $268,000.  I found out recently that the damage to my roof happened during a federally declared major disaster in Los Angeles County where my home is located.  I have checked the FEMA site and obtained the code, DR-4769, for the disaster.  Can I deduct the damage to my roof as a disaster deduction?  If yes, I would like to know the following:

1. How do I calculate the Cost Basis for the deduction?  It's hard to quantify how much I bought the roof for (just the roof) as it is a part of the total buying price of the home.  So can I use the amount I spent to replace the roof, $25,000, as the Cost Basis?

2. How do I calculate the Fair Market Value of the roof before the loss?  Again, it's hard to quantify so can I use the amount I spent to replace the roof, $25,000, for this?

3. I guess the Fair Market Value of the roof after the loss is $0 since it was gone, trashed, and replaced with a new roof, is that correct?

Now, after claiming the disaster deduction, can I, in addition, also claim a "Home Repair/Maintenance Expense" for the $25,000 I spent to replace the roof?  Or is it an "either or" --- I can claim only either the disaster deduction or the Home Repair/Maintenance Expense but not both?  If it is an "either or", which do you think is more advantageous to claim?

Thanks in advance for your much appreciated help! 👍

[AmyC]

1. The basis for just the roof is hard. You could compare value of the house before and after the storm. You may have incurred other damage, like plants, fence, etc. The repair price definitely shows the amount to replace but may not be completely accurate. A new roof replacing a fairly new roof or a 10 year old roof. The $25,000 may have caused an increase in value of the home, maybe not.

2. You can talk to a realtor or other area experts and come up with a reasonable answer for values. The IRS will accept any reasonable method to determine your before and after values.

3. Yes, zero.

4. Not an either or situation.

• If it is your main home, no such maintenance/ repair exists, claim the casualty.
• If this is a rental property, you can depreciate the roof.

[mtl7770]

Thank you so much, Amy! 👍

[mtl7770]

Based on the current estimated value or price of my home that I looked up on Zillow.com, my home is now worth $893,000.  That means a 233% increase from its original $268,000 price in 2002.  On this basis, can I assume that the Fair Market Value of  the roof of my home (just the roof) also increased by 233%?

[Vanessa A]

Yes, if the total overall cost of your home increased by 233%, the overall fair market value of your roof would have increased by the same. 

[mtl7770]

Thank you Vanessa! That's good to know. 👍

[mtl7770]

Thinking about calculating depreciation for the roof...  How many years do I use for the full lifespan of the roof?  27.5, 28, 30 years, or what is officially recognized as the standard lifespan for roofs by the IRS?

[PatriciaV]

Is this a rental or business property? If not, no depreciation can be claimed for a personal residence. The cost of the roof increases your basis in the property should you sell it in the future.

Improvements for rental or business properties are depreciated over the life of the main asset (building). Rental properties are reported on Schedule E. Business assets are reported on Schedule C.

[mtl7770]

The depreciation is not going to be claimed but is just to be used for calculating the Fair Market Value as you'll see later...

Here's the calculations I came up with.  The Cost Basis is calculated based on the discounting method using the Producer Price Index (PPI) rate of change, as shown by the example in this article:

https://www.thebalancemoney.com/partial-dispositions-3192873

For the PPI historical data, please see:

https://fred.stlouisfed.org/series/WPUFD49207

BTW, I found a higher value of $1,000,837 for my property as of the disaster on Feb/2024 from Realtor.com, so this is the amount I'll use in the calculations.  Also, the cost of the new roof is actually only $22,080, not $25,000 as I originally stated in my first post.  Sorry for this mistake.

Purchase price of Home:   $268,000

Date Purchased:  4/4/2002;  PPI on this Date:  138.8

Date of Disaster:  2/6/2024

Cost of New Roof:  $22,080

Date New Roof in Service:  2/21/2024;  PPI on this Date:  256.565

PPI Rate of Change = (256.565 - 138.8) / 138.8 = 0.848451 or 84.8451%

This means the cost increased from 4/4/2002 to 2/21/2024 by 84.8451%.

Therefore, Cost Basis of Old Roof = Cost of New Roof / (1 + 0.848451) = $11,945.14

Depreciation of Old Roof:

No. of Years Life Span:  27.5 years

Annual Depreciation Rate = Cost Basis of Old Roof / 27.5 = 11,945.14 / 27.5 = $434.36861 per year

No. of Days from Purchase to Disaster Date:  7,978

No. of Years to Depreciate = 7,978 / 365.25 (the .25 is to account for leap years) = 21.84257 years

Depreciation from Purchase to Disaster Date = Annual Depreciation x No. of Years = 434.36861 x 21.84257 = $9,487.73

Fair Market Value:

Value of Home at Disaster Date:  $1,000,837 (from Realtor.com)

Percent Change in Home Value = (1000837 - 268000) / 268000 = 273.45%

If the entire home increased in value by 273.45%, then we can apply this increase to the roof also.

Thus, Value of Roof at Disaster Date = Cost Basis of Old Roof x (1 + 273.45%) = 11945.14 x (1 + 273.45%) = $44,608.71

This looks very high since the roof has depreciated, so let's deduct the depreciation.

Value of Roof After Depreciation = 44608.71 - 9487.73 = $35,120.98

Even after deducting depreciation the value still looks so high considering that the new roof cost only $22,080 and the old roof is close to being fully depreciated.  It's only the increase in market value of the entire home that is pumping up the value of the old roof.  I'm afraid to estimate the FMV of the old roof as $35,120.98 so I'll just limit it to the cost of the new roof.  Thus,

FMV of Old Roof Before Loss = Cost of New Roof = $22,080

FMV of Old Roof After Loss = $0 (since the old roof was trashed and gone)

I hope my calculations are valid/acceptable and correct and make sense.  Please let me know what you think.  Does the $22,080 FMV look excessive to you?  Any comments would be greatly appreciated.

Thanks! 😀

[RobertB4444]

No, the FMV being equal to what it cost to replace is the most sensible calculation.  Save the other stuff in case anyone ever questions you about it though.

@mtl7770 

[mtl7770]

Thank you so much, Robert!  I'm glad to know my calculation is fine. 👍