When it comes to major home improvement projects like new roof installations, most homeowners understandably focus on functional upgrades, aesthetics, and value retention. However, as the seasoned roofing experts at C&M Construction in Denver know, there may also be strategic tax advantages to consider that deliver further returns on such necessary investments.
In this detailed blog, we uncover five often overlooked tax benefits applying to roof replacements and various repair/remodeling work. By understanding these little-known incentives, homeowners gain the power to maximize tax savings while enhancing their property’s protection, performance, and appearance for many years to come.
– Home Improvements Tax Credit: For qualifying expenses incurred before 2023, a tax credit of 10% on the first $500k or $2,000 maximum applies to energy-efficient upgrades like cool roofs, eco-friendly roofing materials, and attic insulation installations.
– Capital Gains Tax Exclusion on Home Sales: One-time profits of up to $250k for singles or $500k for married couples remain non-taxable gains when your primary residence appreciates following major repairs or renovations increasing property value like new roofs that provide curb appeal.
– Itemized Deductions for Materials/Labor: For taxpayers who itemize, roofing, siding and other material/installation costs offset taxable income up to a maximum $25,000 deduction in a single tax year. Spreading projects over multiple years maximizes the usage of this benefit.
– Property Tax Assessment Reduction: Many areas offer property assessment adjustments to reflect a home’s reduced value from deteriorated conditions like damaged/aged roofing until repairs are made, resulting in temporarily lower annual tax obligations.
– Accelerated Depreciation of Business Property: For commercial property owners, faster depreciation deductions may be claimed up to 100% of certain improvements’ costs in the year incurred versus standard depreciation schedules stretching deductions over longer periods. Roof replacements/upgrades potentially qualify.
Let’s talk more about the above points.
Home Improvements Tax Credit
For qualifying energy-efficient home upgrades completed before 2023, a non-refundable 10% tax credit is available up to $500 with a maximum credit of $2,000. “Qualified energy property expenditures” include interior/exterior doors and windows, roofing products like cool roofs and eco-friendly shingles/tiles, and attic/duct/wall insulation.
To claim this tax credit, Form 5695 must be filed showing eligible expenditures exceeded the greater of 10% of the home’s assessed value or $600. Receipts and ENERGY STAR certification documentation should be retained in case of IRS questions. Planning renovations to coincide with tax years maximizes its benefits.
Capital Gains Tax Exclusion on Home Sales
For your main home – the one you’ve both owned and lived in for at least two of the last five years before selling – there’s a fantastic tax advantage waiting. If you’re single, you could pocket up to $250,000 in untaxed capital gains, and if you’re a married couple filing jointly, that number jumps to an impressive $500,000. Now, here’s the exciting part: if you’ve boosted your home’s value through significant improvements, like the game-changing addition of a new roof that not only enhances curb appeal but also elevates your property’s overall quality, you’ve just set the stage for a truly invaluable tax break. It’s like turning your home upgrades into a smart financial move!
Itemized Deductions for Materials and Labor
Taxpayers who itemize deductions can write off renovation costs for the tax year in which they were incurred. Unreimbursed expenses like materials, tools, and contracted labor services used for eligible repair/improvement activities may offset taxable income up to $25,000 yearly until the project’s full costs are deducted over multiple filing periods. Spreading extensive projects maximizes tax savings from this benefit.
Property Tax Assessment Reduction
Many municipalities allow temporary property tax reductions when homes experience reduced value owing to deteriorated conditions in need of repair. Aging or damaged roof systems potentially qualify until upgrades are installed. The result is temporarily lower annual property tax bills until full assessed value regains following completed renovations. Planning with local assessors ensures receiving entitlements owed.
By better understanding these strategic incentives within tax codes, partnering with reputable experts like C&M allows maximizing return on necessary home repairs through both property protection enhancements and valuable tax savings little known to many homeowners.
