May 29, 2019

U.S. Tax Code Changes Create New Expensing Opportunities for Commercial Roof Owners

The Tax Cuts and Jobs Act of 2017 has expanded the scope of Section 179 to now include non-residential (i.e. commercial) roofs as well as raised expensing limits; which means there are new tax advantages to repairing or replacing your commercial roof. Changes for Section 179 also mean you can take full advantage of the investment within the current tax year, rather than depreciating it over a period of multiple years.

According to the National Association of Tax Professionals, “The definition of Section 179 property in the tax code has been expanded to include the following improvements to non-residential real property placed in services after the date such property was first placed in service: roofs; heating, ventilation, and air-conditioning property; fire protection and alarm systems; and security systems.” Taxpayers have the option to elect to include such property in their Section 179 expensing calculation. The National Roofing Contractors Association reports that qualifying expenses include all forms of roof improvements- from relatively minor repairs to complete re-roofs.

Most importantly, this expanded definition of Section 179 allows taxpayers to immediately expense costs of qualifying commercial roofing projects rather than recovering such costs over multiple years through depreciation- which means upgrades to your commercial roof can be a great way to achieve a tax write off within the current year.

In addition, the law expands the expensing limits from $500,000 to $1 million, and the phase-out threshold has been increased from $1 million to $2.5 million, making it possible for larger investments such as a re-roof to fall within the expensing limits. The rules are effective for qualifying property placed in service after December 31, 2017. The revised Tax Cuts and Jobs Act states that these amounts will be indexed for inflation starting in 2019.

Another planning opportunity frequently overlooked by taxpayers is whether common repairs such as replacing the membrane on a roof are considered a capital improvement for tax purposes or whether the activities are a currently deductible repairs expense. The final regulations under Section 263(a) that were issued in 2013 provide taxpayer favorable examples of expensing such replacements as repairs.

To determine how your company can best take advantage of changes to Section 179, as well as Section 263(a), it is important to consult a qualified tax professional that can help you understand the specific impact that capital improvement and real property investments will have on your business.

If you have any questions, please feel free to call Superior Services RSH at (800) 843-6561.