179 Tax Deduction for Commercial Roofing Projects 2020 Update
Are you delaying commercial roofing projects because of the cost? Learn how to use the 179 tax deduction to maximize your purchasing power in 2020 and beyond.
A recently updated 179 tax deduction for roofing improvements to commercial facilities, including roofing repairs, waterproofing, and re-roofing, makes 2020 the best time for commercial building owners to keep up with maintenance and make necessary repairs that are considered deductions within the year. Act fast to lock in the best tax credits. Here’s why:
Updated Section 179 Tax Deduction for Roof Maintenance and Repairs
Last year’s Tax Cuts and Jobs Act included a change to the Section 179 deduction that is important to highlight for roofing projects. The new change increases the amount of money that a business owner can deduct (up to $1 million) on their income taxes as an expense in the first year rather than being considered a capital expense subject to depreciation over multiple years. Section 179 of the IRS Tax Code encourages qualified expenses that are investments, like maintenance, and improvements to roofing and HVAC. It allows commercial building owners to deduct the full price of these business purchases in the same calendar year.
This change is significant because, in the past, repairs and maintenance projects to enhance a property, restore it to working condition or adapt it to a new use were considered capital expenses and were subject to depreciation over several years rather than deducted in the first year. Also, under the old rules, a roof coating was a maintenance expenditure, while a roof replacement was considered a capital expense. The Tax Cuts and Jobs Act changed the expensing rules by increasing the amount of the eligible deduction. The investment phase-out now begins at $2,550,000 and is completely phased out when $3,570,000 of Section 179-eligible assets have been placed in service for the tax year—accelerating the expense on commercial roof maintenance results in reduced taxes for a building owner. These limits are subject to inflation starting in 2019 and beyond. Additionally, be aware; if your repair cost exceeds $2.5 million, then you are not qualified for the full $1 million in deductions. Additional benefits may be available through tax rebates and credits for energy-efficient enhancements.
What if you replace the roof on one of your commercial buildings this year for $600,000? Will this qualify?
Yes, if you meet the other Section 179 limitations for income and total Section 179 property placed in service for the year.
What if you replace the roof on one of your commercial building investments this year for $600,000, and you partially dispose of the old roof in the current tax year? Will this qualify?
Yes, if you meet the other Section 179 limitations for income and total property placed in service for the year. The new roof will be capitalized on your depreciation schedule and expensed under Section 179 provision when removing the old roof.
Limitations to the Section 179 Tax Deduction
- Though the amount has changed over the years, as of July 2019, the deduction limit is $1 million.
- To qualify for the Section 179 deduction for any given tax year, any equipment must be purchased (or financed/leased) and in-service between January 1 and December 31 of that year.
- If a taxpayer places more than $2 million worth of Section 179 property into service during a single taxable year, the deduction is reduced by the amount exceeding the threshold.
- The amount allowed as a deduction can’t exceed the total amount of taxable income for the business during that year.
How to Take Advantage of the 179 Tax Deduction
Please contact your tax professional to learn how you can take advantage of the 179 tax deduction for roofing projects. These deduction limits are subject to inflation, and can change without notice, so it is important to consult with your tax professional so they can help you take advantage of this tax code.
See more details regarding these new expensing and depreciation rules, view the IRS fact sheet.