If you plan to install a new roof, you need to familiarize yourself with the IRS (Internal Revenue Service) Section 179 deduction. This section is essential for two main reasons. First, it allows you to make the most of the deduction for your business to save a significant amount of money on your taxes. Secondly, it is a considerable discount on the overall cost of your new roof.
As a roofer, you need to understand the section 179 deduction so that you can explain its benefits to your commercial clients. You need to help them know how much they can save on their new roofs. So, if you are hearing about the section 179 deduction for the first time, here are the five most important things you need to know about it.
Deduct the Cost of Your New Roof
The tax reform act of 2017 expanded the rules under section 179 of the IRS tax code, allowing you to take an instant deduction of about $1,040,000 for the cost of your new roof. Although most businesses qualify for this deduction, it has a few limitations.
For instance, the $1,040,000 is for a single purchase. But you can continue to take deductions for other purchases, especially for roofs on other buildings, but the amount starts to reduce after spending $2,590,000 within a year. It is completely phased out after spending $3,630,000. Also, the roof must be used mainly for business purposes for you to qualify for this deduction.
Write-Off the Cost of Your Old Roof
When you completely replace your existing roof, you can write off the cost of the existing roof to enjoy additional tax benefits. That way, the amount representing the original cost of your existing roof on the books can be removed from your books as a loss, with less accrued depreciation. This helps you to lower your taxes due to any loss from writing off the cost of your existing roof.
Deduct the Cost of Your New Roof Even If You Don’t Pay for It Immediately
The section 179 deduction allows you to deduct the cost of your new roof immediately after it’s installed and deemed functional. Fortunately, the IRS doesn’t care if you’ve paid for it yet because you could have taken a loan to fund the roofing project, or you’ve agreed with your roofer to defer the payment. However, remember that the deduction is limited to your taxable income.
Deduct the Cost of Roof Repairs
Although this deduction is designed for new roofs, you can still take a deduction for the cost of repairing your existing roof. For instance, if you are patching up a roof puncture or repairing your skylight, IRS allows you to take a deduction within the year you incur those costs.
Roofs Aren’t Eligible for Bonus Depreciation
Bonus depreciation is an additional depreciation deduction taken for capital expenditures exceeding $3,630,000. However, roofing costs don’t qualify for this bonus depreciation. For more information about Section 179 Deduction, talk to Commercial Roofs today.