How New Tax Law Impacts Commercial Roof Replacement

Guess everyone has heard about the new tax law and how it impacts different spheres of our life. Surprisingly, roof is not an exception. The Tax Cuts as well as Jobs Act of 2017 (TCJA) passed in December 2017 make it easier to replace commercial roof. If you’re a business owner and you’ve been thinking about replacement, this is definitely the right time. The TCJA produces specific benefits for business realty owners under its expansion of the Internal Revenue Service tax code.

Section 179 Expensing

Commercial roof coverings are currently categorized as an expense, so don’t miss a chance to maximize the tax benefits of roofing system replacement. Due to increased Section 179 Expensing, it is possible for particular taxpayers to deduct the complete acquisition price of specific types of residential or commercial property on their revenue taxes, as opposed to capitalizing the cost of the residential or commercial property. In the total dollar amount of a roofing system replacement should also be included the rooftop equipment since Section 179 now welcomes A/C systems and also other company-specific products, in addition to fire defense, alarm systems and safety systems. The allowable cost increased from $500,000 to $1 million in 2018, and the phase-out deduction raised to $2.5 million.

Bonus Depreciation

Bonus Depreciation is another benefit under the new law. You might want to change your roofing because buildings placed in service after Sept. 27, 2017 and before 2023 get 100 percent bonus depreciation; 80 percent for 2023, 60 percent for 2024, 40 percent for 2025 as well as 20 percent for 2026. The acquisition day is the day of the contract for building purchased with a written contract.

The certified property, or the roof covering, does not need to be new, as long as you, the taxpayer, have not formerly utilized the residential property as well as it’s not acquired from a related party.


However, note that a qualified residential or commercial property does not consist of buildings made use of in a service that is not subject to the net business rate of interest expense limitation, which could suggest a potential loss of prior credits. Currently interest is limited to 30% of a company’ adjusted taxable income, with the exemption of businesses with ordinary annual gross receipts of $25 million or less. You can opt out of the interest limitation if you decide to elect the Alternative Depreciation System (ADS) recovery period as opposed to MACRS (the Modified Accelerated Expense Healing System). ADS recovery periods are 40 years for nonresidential building, 30 years for household and also 20 for improvement property.

You should also know other possible loss of credits previously granted, such as state and local tax and property tax deduction, as well as property placed in service. Initially, exclusion of local income and sales tax deductions is for non-corporate taxpayers, and $10,000 is the limit for deductibility of property tax which applies to individuals, not businesses. Second, under the new law you can deduct up to $1 million starting in 2018. The limit is reduced dollar-for-dollar if $2.5 million in property is placed in service during the year. This would affect the election for roofs and other rooftop equipment now considered expenses for nonresidential real property placed in service after the date the real estate was first placed in service. The provisions are effective for property placed in service in 2018.

In general, the TCJA will certainly provide considerable tax financial savings for commercial organisations considering a roofing replacement. Consider the pros of roofing system substitute when reviewing projected revenue, tax liability and the application of accelerated depreciation to take advantage of these increased expenses on all acquisitions.

Roofing Chattanooga has been a leading provider of commercial and residential roof services in Chattanooga, Tennessee for more than 50 years. We provide commercial repair, replacement and maintenance to serve companies of all sizes in all of the Greater Chattanooga area including North GA and Alabama. Schedule a call to talk learn about installation costs as soon as possible.


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