Can new roof be added to the cost basis of a property sale?

Forum|Forum|4 years ago
April 4, 2022
2 replies
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According to IRS Publication 523 page 9, new roof is included in the Examples of Improvements That Increase Basis. But when googling there are many experts who answered "No". Why is it different, and does it have anything to do with whether it is a rental or a primary home? Thank you in advance.

TurboTax Home & Biz Windows

Best answer by KrisD15

Yes it depends on if it is a rental.

If it is a rental, the roof is added as a separate asset if done after the rental is placed into service and added to the basis if done while the building is first being made ready for service.

For a primary residence, it gets a bit more complicated.

If the roof adds value, it could be added to the basis, but if it is more of a repair or replacement, it would not increase the basis.

For example, an old asphalt roof replaced with a metal roof could add value and therefore be added to the bass, but replacing the roof after 10 years of ownership with a similar roof would not count.

It is more of a case by case issue.

The main point is -

did the roof just bring the property back to the point of when you originally purchased it (not added to basis) or

did you replace the roof in a way where it caused the property to be MORE than when you first purchased (added)

KrisD15Answer

Yes it depends on if it is a rental.

If it is a rental, the roof is added as a separate asset if done after the rental is placed into service and added to the basis if done while the building is first being made ready for service.

For a primary residence, it gets a bit more complicated.

If the roof adds value, it could be added to the basis, but if it is more of a repair or replacement, it would not increase the basis.

For example, an old asphalt roof replaced with a metal roof could add value and therefore be added to the bass, but replacing the roof after 10 years of ownership with a similar roof would not count.

It is more of a case by case issue.

The main point is -

did the roof just bring the property back to the point of when you originally purchased it (not added to basis) or

did you replace the roof in a way where it caused the property to be MORE than when you first purchased (added)

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Sdong258Author

Hi there,

Thank you for answering my question and I just now ranked the answer. I sent out another question to you yesterday as the below:

While I was trying to find out what can or can not be included in cost basis with the property sold, there is a charge of $150 called, Capital Contribution, under the category, Adjustments for items paid by seller in advance. I am not sure what it is and can it be included to the cost basis.

In addition, here I just wanted to make sure the followings can't be included in cost basis besides those obvious fees: Lender's Inspection Fee, Tax Service Fee, Flood Cert Fee and Processing Fee. "

Thank you,

Sdong258

ThomasM125

The fees you mention are selling expenses that you subtract from the sales proceeds to determine the gain on sale of your house. Although technically not added to the basis, they are deductible when you sell the house.

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Orcasong

Some "experts" say a new roof is not deductible, notwithstanding what IRS says. The reason for this is that some experts aren't sufficiently expert. The IRS guidance is clear. A new roof clearly extends the life of the property and adds value as well.