Under the "Tax Cuts and Jobs Act" introduced in November, business owners have a new way to recover costs on certain projects. In fact, roofing projects can count if it is a qualifying property. Qualifying property is defined as depreciable tangible personal property that is purchased for use in the active conduct of trade of business.
Prior to the new law, a taxpayer had two choices — account for large capital expenditures over years of depreciation, OR forego larger costly projects in favor of smaller repair jobs. This put many business owners in a frustrating dilemma, especially when the business property was in need of major roof repairs.
Let’s take a look at a hypothetical case. The Widget Factory needed to install a new roof valued at $1.5 million with an expected lifespan of 15 years. If the business owner wanted to recover the costs, he or she would have to take depreciation of the roof ($100,000 per year over 15 years). OR, if the owner wanted to avoid depreciation, he or she could only deduct up to $500,000 in annual expenses.
So what has changed? The new Tax Cuts and Jobs Act allows businesses to undertake certain projects and avoid devaluation. The new tax law applied to short-lived capital investments with expected lifespans of 20 years or less — and that includes business improvements. In addition, the new tax code raises the maximum investment limit to $2.5 million. In short, that means the Widget Factory could deduct at $1.5 million in a single year.
The ultimate goal of the new tax law (set to last through 2025) is to encourage a gradual increase in spending on building and enhancements. Of course, we aren’t tax specialists, so we encourage you to consult a CPA to see how the new tax law might assist you in building repairs or enhancements, and, as always, feel free to call us at Global Roofing Group (fka Roofing Southwest) when and if you need a hand with roof repairs or replacement.
Please Note: This article is for informational purposes only. Please contact your tax professional for any tax-related questions.