Taxes and Preventive Maintenance
When you have a leaking roof, there is a wide spectrum of options for fixing it. You can choose to “patch and pray”, to tear off the roof and completely replace it, or you can choose to renew and restore the roof.
Debates about the best way to fix a roof abound. Often, however, these debates focus only on the technology involved and the total cost after taxes may not be considered. However, when the tax consequences are considered, preventive maintenance financially becomes the clear choice.
Internal Revenue Codes specify that the cost of maintenance for business property is a deductible expense. You will do well to explore this issue with your tax consultant before making any decision. On the other hand, money spent for capital improvements must be amortized over the life of the property and can only be deducted as an annual depreciation. The cost of the improvement is recovered in either case, but the period over which the deductions are spread (immediately for maintenance, 15 years for improvements) gives restoring a roof a major cost advantage.
Not all roofing systems will receive the same tax advantages. How the work is performed is determined if the cost can be written off in the current year or must be capitalized. The Supreme Court offered the following guideline in Welch v. Helvering: A repair is an expenditure for the purpose of keeping the property in an ordinarily efficient operating condition. It does not add to the value of the property, nor does it appreciably prolong its life. It merely keeps the property in an operating condition over its probable useful life for the uses for which it was acquired. Expenditures for that purpose are distinguishable from those for replacement, alterations, improvements, or additions which prolong the life of the property, increase its value or make it adaptable to a different use. “The one is a maintenance charge, while the others are additions to capital investment which should not be applied against current earnings.”
In selecting a process for your roof, you should do well to first be sure your choice makes commercial sense. In all cases, unless the roof is too far gone, a good coating system will be the most effective. Add the tax savings advantage – and you will quickly see this makes sense.
We provide many property owners and managers with preventive maintenance programs. Prior to beginning the program, a baseline assessment needs to be performed and deficiencies repaired. This will bring the roof system back to a maintainable condition.
A typical scope of work for a program follows:
1. Perform a comprehensive inspection
2. Remove all debris from the roof.
3. Make minor repairs.
4. Caulk flashing, pipes as needed.
5. Top-off pitch pockets.
6. Evaluate any active leaks.
7. All repairs will be done according to the
manufacturer’s specifications.
Spann Roofing will customize a plan that fits your needs, facility, and budget. The initial baseline survey is free.