Rental Property Owners: Deduct Old Roof

The IRS in its repair regulations gives you a partial disposition election that benefits you when you replace a structural component such as a roof on your office building or rental property. (check out previous post: Landlords and Business Owners: New Law Improves Energy Tax Benefits)

Previously, when you replaced a structural component such as a roof, the old roof’s remaining depreciation continued on your books, an ugly result. But now, say thank you to the IRS.

Beneficial Change in IRS Policy

The IRS allows property owners to elect a “partial disposition” deduction. Using this election means when you replace an old roof, you can deduct the undepreciated basis of the old roof rather than continue depreciating it. This change simplifies your financials and provides an immediate tax benefit.

Advantages of the Partial Disposition Election

Immediate deduction. With the election, you claim an immediate tax deduction for the undepreciated basis of the old component.
Beat the recapture tax. When you eliminate the old component, you avoid the capital gains recapture tax of up to 25 percent (technically known as “unrecaptured Section 1250 gain”) when you sell the property.

Deducting Old Roof: Partial Disposition Election Example

If you replace an old roof that initially cost $100,000 and has $40,000 of depreciation remaining, you can deduct this $40,000 immediately, rather than depreciating it over the remaining useful life.

You also avoid paying the unrecaptured Section 1250 gain tax on the $60,000 of depreciation you have already taken.

Tax Deductions for Landlords and Rental Property Owners:

Ken Weinberg, Enrolled Agent and tax reduction specialist works with many clients who are landlords, residential and commercial property owners. If you plan to replace a building component, contact Ken-Mar Tax to ensure the best tax benefit, 440-777-2207.

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As an expert in small business tax services and tax consulting Ken-Mar Tax eats, sleeps and breathes small business tax strategies. Being an enrolled agent allows founder, Ken Weinberg, to represent you to the IRS - something only a CPA, tax attorney and Enrolled Agent can do. EAs are the only federally licensed tax practitioners who specialize in taxation and also have unlimited rights to represent taxpayers before the IRS. It also means he is continuously being updated on the new IRS tax codes and taking classes from the IRS that provide guidance on how to file returns so that they are not "flagged."

When you get your taxes prepared by Ken Mar Tax you also have the option to purchase the Tax Audit Protection Plan to avoid the extra costs of paying for audit representation. If you are audited by the IRS, State of Ohio or local taxing authorities, Ken-Mar Tax will meet with the taxing authorities on your behalf to negotiate a settlement for you. The fee covers all costs up to the Appeals level, including up to 15 hours of correspondence with the auditing party – either the IRS, State of Ohio or locality.