Shedding Light on Tax Benefits: Is Roof Replacement Tax Deductible?

When the time comes to replace a roof, the average homeowner has many questions. Who should I hire? How will I pay for this project? Can I access financing? Is the roof replacement tax deductible? Are there other tax incentives for homeowners in my situation?

Each of these questions has value. Every homeowner should perform a comprehensive financial analysis of their proposed roof replacement. Addressing tax-related issues has specific importance because homeowners deserve to know the truth.

Defining Home Improvements For Tax Purposes

A home improvement is a capital investment that permanently upgrades a component of your home or property. This upgrade prolongs the useful life of these assets. It also provides an appreciable increase in the market value of your property. In other words, it raises your cost basis from the price you paid for your home to a new value that incorporates the expense of the upgrade. Tax professionals refer to this increased property value as your adjusted cost basis.

Is A Roof Replacement Tax Deductible?

A tax deduction reduces your taxable income for a given year. Taxpayers willingly accept a tax deduction because it helps lessen their overall tax liability. Unfortunately, most home improvements, including the typical roof replacement, do not have a tax-deductible element.

A tax credit lowers the amount of tax you owe dollar-for-dollar in a particular year. If your federal income tax liability is $5,000 and you have a $2,000 federal tax credit, your federal income tax liability is reduced to $3,000. Most taxpayers prefer credits over deductions.

Under the Inflation Reduction Act, homeowners can access federal tax credits for making energy-efficient home improvements between January 1, 2023, and December 31, 2032. 

These credits tie to a broad range of Energy Star-certified products and equipment. This program aims to assist homeowners with transitioning to clean energy.

Although a roof replacement is not included in this program, other upgrades to the roofing system provide homeowners with a federal tax credit. Two improvements in particular are worth noting:

Insulation Tax Credit

Annually, a taxpayer can claim up to 30% of the product cost of any qualifying insulation upgrade (to a $1,200 maximum amount credited) purchased and installed in a given year. Bulk insulation materials and products that reduce air leaks meet the qualification criteria. Those items include insulation rolls, blow-in fibers, rigid boards, batts, expanding spray insulation, pour-in-place systems, caulk, spray foam, weather stripping, and house wrap.

Windows And Skylights Tax Credit

Each year, a taxpayer may claim up to 30% of the product cost of any skylight (to a $600 maximum amount credited) purchased and installed that year. To qualify for the credit, the skylight must meet the Energy Star Most Efficient criteria. Because skylights and insulation products are home envelope improvements, the annual aggregate maximum amount credited for a given year is capped at $1,200 toward the combined purchase of these items.

What Is Considered A Historical Building?

A historic building, in this case, a home, refers to a structure with historical, architectural, or cultural significance to the nation, state, municipality, or community.

Is The Restoration Of A Historical Building Tax Deductible?

Generally, federal (and state) tax deductions are not associated with restoring a historic structure. However, federal and state tax incentives (in the form of credits) may be available to the Secretary of the Interior’s Standards for Rehabilitation and corresponding provisions under applicable state law. For example, the Code of Virginia provides a historic rehabilitation tax credit for eligible expenses when rehabilitating a certified historic structure. To learn more about these tax programs, consult a knowledgeable tax advisor.

Does Restoring The Roof Of A Historical Building Offer Other Tax Benefits?

In the State of Virginia, a property must be “listed individually on the Virginia Landmarks Register” or “certified by the Director of the Virginia Department of Historic Resources as contributing to the historic significance of a historic district” to meet the criteria of a “Certified Historic Structure.” In that event, a roof restoration may meet the qualifications under this program. Homeowners are encouraged to speak with a qualified tax professional to learn more about state tax incentives (as well as federal tax credits) available to them.

Working With A Knowledgeable Roofing Contractor

As a third-generation, family-owned business, Stevens Roofing Corp works with homeowners throughout Norfolk, VA, and surrounding areas. We specialize in roofing projects, including repairs, replacements, inspections, and historical restorations. In particular, our historical roof restoration services set us apart as one of the premier roofing companies in Norfolk, VA.

With more than 77 years of experience, we are the local roofing contractor who knows the intimate details of what defines excellence in customer service, craftsmanship, and product quality. We won’t let you down or fall short of your expectations. Contact Stevens Roofing today to learn more about our service offerings, schedule an appointment, or reach out with any questions.