A roof replacement is quite a costly process. It involves hiring a premier contractor, selecting the right roofing materials, and applying for permits, all of which add to the total cost.
Amidst all this, homeowners often wonder if they can get any financial relief through tax deductions. For homeowners in Wisconsin, understanding the tax implications of a roof replacement is crucial to managing costs effectively. This blog post will explore the tax deductibility of roof replacements in Wisconsin, along with some practical tips to save money on this essential home improvement project.
Understanding Home Improvements and Tax Deductions For Roof Replacements
To determine if roof replacement is tax-deductible, it’s important to distinguish between home repairs and home improvements. The IRS generally categorizes repairs as expenses that keep your home in good condition but don’t add significant value. Examples include fixing a leaky faucet or patching a small hole in the roof. These costs are typically not tax-deductible.
Home improvements, on the other hand, add value to your property or extend its lifespan. These can include adding a new room or upgrading your kitchen. This is the category that includes replacing your roof as well. While home improvements are not immediately deductible, they can provide tax benefits when you sell your home. This is called an adjusted basis, and we cover it in the next section.
Adjusted Basis, Capital Improvements, and How They Can Help You Save Money
A roof replacement is generally considered a capital improvement because it adds value to your home and prolongs its useful life. As a capital improvement, the cost of replacing your roof is not deductible in the year you incur the expense. Basically, a roof replacement is not tax deductible in Wisconsin. However, it can be added to the basis of your home.
But what do we mean by ‘basis’?
The basis of your home is essentially its purchase price plus the cost of any improvements. As you improve your home, a higher basis can reduce your taxable gain.
For instance, if you bought your home for $200,000 and spent $20,000 on a roof replacement, your new basis would be $220,000. This is called your adjusted basis. If you later sell your home for $300,000, your taxable gain would be $80,000 ($300,000 – $220,000), rather than $100,000.
However, for this to happen, you need to make sure all the adjustments meet building codes, are completed in compliance with local and industry regulations, and that you have a proper record for all the eligible home improvements.
What About Energy Efficient Roofs?
Another way to get tax benefits from a roof replacement is by choosing energy-efficient materials. Energy efficiency is increasingly important and everyone from homeowners to manufacturing industries are striving to be more efficient. The government also recognizes this.
The federal government offers tax credits for energy-efficient home improvements under the Energy Efficient Home Improvement Credit. If you install a solar roof, including solar shingles or tiles, you may qualify for the credit. This credit can directly reduce the amount of tax you owe, making it a more immediate benefit than increasing your home’s basis.
Note: Most roofing materials do not qualify for tax credits under this incentive. Review the IRS website for more information.
Are There Tax Credits For Historic Homes?
Wisconsin is a beautiful state with a rich history. There are countless properties with historical significance, gracing the state with their beauty. So is a roof replacement for these historic homes tax deductible? Are these eligible for tax credits? The answer is yes.
As a homeowner of a historic property in the Badger State, you may qualify for income tax credits for your roof replacement. How? Under the historic homeowners’ tax credit program, a homeowner can be eligible for up to 25% of the ‘cost of approved rehabilitation’ as a tax credit.
However, to get this, you must first check whether your property meets the criteria for a historical home. For example, it must be listed in the National/State Register of Historic Places.
You must also ensure that the work you plan to do falls within the five categories of work eligible for the tax credit, as defined by the Wisconsin statute.
After this, you can fill out the application and submit all the necessary paperwork to the State Historic Preservation Office.
For more information, you can visit the Wisconsin Historical Society website: Tax Credits for Historic Homes
Are There Tax Credits For Commercial Properties?
As we can see, residential properties in Wisconsin are not generally eligible for tax deductions or credits when it comes to replacing a roof. However, this does change if you are a commercial business owner.
While residential roofs aren’t, a commercial roof replacement can be tax deductible. The expansion of Section 179 of the Tax Cut and Jobs Act allows business owners to deduct the full cost of a new commercial roof up to $1 million in the first year. This recent change is a significant benefit for business owners looking to make substantial improvements to their properties.
Wisconsin-Specific Considerations
Wisconsin state tax laws align closely with federal tax laws when it comes to home improvements and tax deductions. However, always stay updated on any state-specific incentives or programs that might apply. Occasionally, state or local governments offer additional credits or rebates for home improvements, especially those that promote energy efficiency or environmental sustainability.
Ways to Save Money on a Roof Replacement In Wisconsin
Research and Get Multiple Quotes:
Don’t settle for the first roofing contractor you find. Obtain multiple quotes to ensure you get a competitive price. Look for contractors with a good reputation and reviews to ensure quality workmanship.
Time Your Project:
Roofers tend to be busiest in the late summer and fall. Scheduling your roof replacement during the off-season (winter or early spring) can sometimes result in lower prices due to less demand.
Use Quality Materials:
While it might be tempting to choose the cheapest materials, investing in higher-quality, durable roofing can save you money in the long run by reducing the need for repairs and extending the time before another replacement is needed.
Also Read: The Ultimate Guide To Roofing Materials For Flat Roofs
Check for Manufacturer Warranties:
Some roofing materials come with manufacturer warranties that can cover defects and reduce long-term costs. Be sure to understand the warranty terms and what is covered.
Explore Financing Options:
Many roofing companies offer financing plans that can spread out the cost of a roof replacement over time. Some plans may come with low or no interest for an introductory period, which can make the expense more manageable.
Check for Local Rebates and Incentives:
Local utility companies or government programs sometimes offer rebates or incentives for energy-efficient home improvements, including roof replacements. These can help offset the initial costs.
Choose Us For Your Roof Replacement!
When you want to replace your roof, choose Prestige Roofing for a seamless and stress-free experience. We specialize in delivering top-quality roof replacement services that will not only enhance the look and functionality of your home but also save you money in the long run and boost your property’s value. Our expert team is dedicated to making sure every installation is done to the highest standards of quality and durability, using only the best materials available. We know that a new roof is a big investment, which is why we offer flexible financing options to help you manage the costs comfortably.
Contact us today at (920) 791-0414 to learn more.
