Rental Home question

Both items you describe are significant improvements, which should be depreciated over 27.5 years. However, there are special, shorter depreciation periods available if your rental property is located in the "Gulf Opportunity Zone" and under other special conditions. Also, if the roof were damaged -- as from a weather event -- it might be considered a repair. Generally, though, you're looking at 27.5 year-depreciation whenever you're dealing with a residential rental property "improvement." You can read all about it, in Pub 527. It's available online, in html. I just browsed it briefly, as I was preparing this response, and here's a link:

In each case I'd consider them to be a new asset, with 27.5 year expensing.

-- ArtKamlet at a o l dot c o m Columbus OH K2PZH

Capital improvements are not deducted in the year of expenditure, but added to your cost basis and depreciated annually. Straight line is 27.5 years. The same would apply to your new roof.

Here are capital improvements, and depreciable over the next

Section 179 depreciation is not allowed on rental properties. Regards,

Mark

What happens to the remaining costs of the old windows and roof?

There is no adequate basis for subtracting them from the original "total depreciation" established, so they'll just continue as a part of that -- in addition to the separate itemization for the _improvement_ cost. They were, in fact, a part of the cost paid for the total property -- which was not in any way diminished by the improvement process. Bill

I doubt you have segregated costs for those items from the initial purchase, or for that matter, from construction records.

Generally the house cost basis continues to be depreciated over time with no change in it's initial basis because you stripped off the shingles or replaced windows or doors. As I recall, replacing shingles is treated as a repair expense unless you start replacing the roof deck or other roof structural systems.

-- Paul A. Thomas, CPA Athens, Georgia

Since OP owned it "for many years" he might have already replaced the windows and roof, and be on the second replacement, in which case I think the remaining depreciation on the previous set can be taken immediately. I agree that this is unlikely, because if he'd done it before he probably wouldn't be asking about the tax treatment now. Seth

I am having trouble reconciling this answer to Art's original answer.

Five shingles here, ten shingles there, that's maintenance.

Replacing much or all of the shingles, that's a separate new asset, 27.5 years.

-- ArtKamlet at a o l dot c o m Columbus OH K2PZH

Replacing the entire roof makes for a new asset.

Replacing a few shingles is a repair to the roof.

Seth

"Arthur Kamlet" wrote

The facts and circumstances may lead to a different deduction, as seen here:

-- Paul A. Thomas, CPA Athens, Georgia

All posts seem to take the position that this is an improvement. I am not so sure. If they are replacing existing windows, and do not add materially to the use to which the property can be put, and do not appreciably extend the useful life of the property or substantially increase its value, they are repairs. Even replacing a roof is a repair if it meets this test. Never mind what the IRS says, look at the statute and relevant judicial decisions. Having said that, keep in mind that the IRS takes the position "never mind the statute and relevant judicial decisions, we are the IRS and do what we want".

New windows significantly increase the value of the home. It is something that buyers look for and consider important. A new roof appreciably extends the useful life of the building.

Bob Sandler

this is really a case-by-case analysis.