Your firm’s fiscal year may not mean that April 18, 2017 is tax day for you, but knowing a few tips and tricks is a good strategy for getting your commercial roof to give back to you at tax time. As a leader in commercial roofing for southeast New York, we know most business owners view their roofs as — no pun intended — overhead. Capital repairs, however, are tax deductions, though you can depreciate some roof work while taking the full deduction for other work.
You have to depreciate any work that adds value to your building, restores it to its original condition, or customizes it for a different use. This is called the BRA test: betterment, restoration or adaptation. Examples:
- You replace your old BUR roof with a new single-ply membrane, which adds enormous commercial value to your building (a betterment) and is also an upgrade, so you must depreciate its cost over years
- Your newly purchased building’s previous owner neglected the roof, so you hire a commercial roofer to restore it to operable condition
- You replace the existing roof of your restaurant with a rooftop wine-tasting patio; that adaptation must be depreciated over 39 years
The pro tip on this is simple: make as much roof work as you can a repair. If your goal is avoiding depreciation in favor of deducting the cost of the repair in a single year, work with your commercial roofer to make a repair, not a replacement. Document the repair work with invoices, photographs and diagrams.
Regular maintenance, such as costs to have a commercial roofer perform annual inspection and minor repairs, is fully deductible in the year the work was done. The IRS requires the work to meet all four of these guidelines:
- Repairs are regularly recurring activities of the type you would expect to attend to
- Repairs result from wear and tear of your trade or business
- Repairs are needed to keep your property operating efficiently in its normal condition
- Repairs would need to be performed either more than once during a 10-year period (for buildings and building-related structures), or more than once during the property’s class life (for property other than buildings)
For complete commercial roofing needs throughout southeast New York, please contact us at Vanguard Roofing. We can help at tax time and any time to get your commercial roof working for you.