How to Amortize the Roof on a Rental House

Amortization is the process of deducting part of the cost of a large purchase over the course of several years rather than in the year the purchase was made. A large purchase could decrease net income completely, or result in zero tax liability for a whole year. Instead, the cost is deducted gradually during the period the item is in use. Necessary repairs such as the replacement of an entire roof on a rental property must be amortized, while a small roof repair must be deducted in the year the repair was made.

Instructions

1. • 1

     Determine the actual cost of replacing the roof, including hired labor and materials. Do not include labor you perform.

   • 2

     Use the amortization percentage tables in IRS Publication 527 (see Resources) to determine the amount of depreciation to claim.

   • 3

     Multiply the total cost of the roof by the percentage listed in the amortization percentage table.

   • 4

     Report the amount of the expense on IRS Form 4562, Depreciation and Amortization.