The Tax Cuts and Jobs Act approved by Congress in December 2017 expands the definition of qualified real property eligible for full expensing under Section 179 of the tax code to include improvements to nonresidential roofs. Following is more information about Section 179 and the provision to add nonresidential roofs as qualifying property as of Jan. 1, 2018. This information will help you determine if your company is eligible for this preferential tax treatment of improvements to your nonresidential roof.
Section 179 allows taxpayers to immediately expense the cost of qualifying property rather than recovering such costs over multiple years through depreciation. The Tax Cuts and Jobs Act significantly expands the expensing limits under Section 179, with the maximum amount a business may expense now set at $1 million and the phase-out threshold increasing to $2.5 million. These new limits are effective for qualifying property placed in service in taxable years beginning after Dec. 31, 2017, and the amounts will be indexed for inflation starting in 2019.
Addition of Roofs as Qualifying Property
The Tax Cuts and Jobs Act expands the definition of qualified real property eligible for Section 179. As of Jan. 1, 2018, qualifying a property for Section 179 includes “improvements to nonresidential real property placed in service after the date such property was first placed in service: roofs; heating, ventilation, and air-conditioning property; fire protection and alarm systems; and security systems.”
Given these changes to Section 179 by the new tax law, qualifying taxpayers may now elect to fully expense the cost of any improvements to nonresidential roofs beginning in 2018 and in future years. Essentially, any improvements to nonresidential roofs, including full reroofs of existing buildings, may now be expensed in the year of purchase by any taxpayer eligible to deduct expenses under Section 179.
Please contact us (or contact your tax professional) if you have questions regarding how your company can take advantage of this more favorable tax treatment for improvements to nonresidential roofs in 2018.