Can you write off the old roof when you replace it on a rental building?
Often, yes. Under the IRS partial disposition election, when you replace part of a building such as the roof, you can treat the old part as disposed of and deduct its remaining undepreciated cost that year, instead of depreciating a roof that no longer exists. The election is made on a timely filed original return for the year of the replacement, so it has to be decided before you file.
Why owners end up depreciating two roofs
When you buy an apartment building, the roof, the boiler, the windows and the wiring are all part of one asset: the building, depreciated over 27.5 years. Replace the roof in year ten and the new roof is a separate improvement with its own 27.5 year schedule. Without an election, the old roof stays inside the building's basis and keeps being depreciated for another seventeen years, even though it went to the dump.
The Treasury regulation on dispositions, 26 CFR 1.168(i)-8-8), fixes that. Paragraph (d)(2) lets a taxpayer elect to treat the retirement of a portion of an asset as a disposition. Depreciation on the retired portion stops and its remaining basis is recognized as a loss. The regulation's own Example 7 is a roof: an owner replaces 60% of a building's roof, makes the election, stops depreciating the old 60% and recognizes a loss, and the new roof becomes a separate asset.
Should you make the election? A quick decision guide
| If this is true | The election usually |
|---|---|
| The replaced part was large (roof, boiler, elevator, all the windows) and the building has many years of depreciation left | Helps: a big deduction now instead of small ones for years |
| You can reasonably work out what the old part cost when the building was placed in service | Is practical: the regulation allows reasonable methods, below |
| The part was small, like one water heater or a few doors | Is rarely worth the paperwork; look at the de minimis and routine maintenance rules instead |
| The building is almost fully depreciated | Adds little: there is not much basis left to write off |
| The old part was destroyed by a fire or storm, or the building is being exchanged or sold in part | Is not needed: the regulation treats those as dispositions anyway |
That last row matters. Paragraph (d)(1) of the regulation says a partial disposition caused by a casualty, one in a like-kind exchange or involuntary conversion, and a sale of a portion of an asset count as dispositions even if you make no election. For an ordinary scheduled replacement, the election is the only way to get the write-off.
How to put a number on the old roof
Your closing statement rarely lists what the roof cost. The regulation, at paragraph (f)(3), accepts any reasonable method used consistently when the records do not show it. It names three:
- Discount the cost of the new part back to the year the building was placed in service using a producer price index, such as the Producer Price Index for Final Demand. This works only when the replacement restores the old part rather than bettering it.
- Allocate the building's original basis by relative replacement cost: what share of the cost to rebuild the whole building today is the roof.
- Use a cost segregation or component study that already split the purchase price into parts.
Whichever you use, keep the working in the property's files with the contractor's invoice. Your tax preparer will want both.
Example a made-up 24 unit building was placed in service in January 2016 with a building basis (no land) of $1,650,000. In June 2026 the owner replaces the whole roof for $96,000. A contractor's estimate puts the cost to rebuild the entire building today at $3,000,000, so the roof is $96,000 / $3,000,000 = 3.2% of it, and 3.2% of $1,650,000 is $52,800 of original roof basis. Yearly depreciation on that slice is $52,800 / 27.5 = $1,920. Depreciation already claimed: $1,840 for 2016 (11.5 of 12 months under the mid-month convention), $17,280 for 2017 to 2025 (9 years at $1,920), and $880 for 2026 (5.5 months). That is $20,000 in total, leaving $32,800. With the election, the owner deducts the $32,800 for 2026 and starts depreciating the $96,000 new roof. Without it, the $32,800 trickles out at $1,920 a year until 2043.
The deadline and how the election is made
Paragraph (d)(2)(ii) of the regulation sets the rules, and they are strict:
- Timing: by the due date, including extensions, of the original return for the year of the disposition.
- Manner: you make the election simply by reporting the gain, loss or other deduction for the disposed portion on that timely filed original return.
- Not by Form 3115: the regulation says the election may not be made through an application for change in accounting method, apart from narrow exceptions such as when the IRS later reclassifies a deducted repair as an improvement.
- Revoking it later requires a private letter ruling and the IRS Commissioner's consent.
In practice that means the decision belongs in the tax-prep meeting for the year the work was done. If the return goes in without the loss, the chance is generally gone.
What happens the next time the roof is replaced
The regulation's Example 8 covers a building whose roof is partly replaced twice and whose records cannot show which sections were removed the second time. In that case the owner may use a first-in, first-out assumption: the oldest roof sections are treated as the ones removed. The simpler habit is to record each replacement as its own asset with its date, cost and the area it covered, so the next disposition is a lookup, not a reconstruction.
Keeping the records in DoorKeeping
In DoorKeeping, each property's LLC has its own ledger, and the building, land and each improvement can sit in separate accounts with the invoice attached in documents. When a roof is replaced, you can ask your AI app to pull the original purchase records and the new invoice together for your tax preparer. DoorKeeping keeps the numbers organized; it does not decide whether to make the election or give tax advice, so that call stays with you and your preparer.
Sources
- 26 CFR 1.168(i)-8, Dispositions of MACRS property (Cornell LII), read Oct 30, 2026
- IRS, Publication 946, How To Depreciate Property, read Oct 30, 2026
Questions
- Do I need Form 3115 to write off a replaced roof?
- Generally no. The partial disposition election is made by reporting the loss on a timely filed original return for the year of the replacement, and the regulation says it may not be made through a Form 3115 except in narrow cases.
- What if I cannot find what the original roof cost?
- The regulation allows a reasonable, consistent method, such as discounting the new roof cost with a producer price index, allocating by relative replacement cost, or using a cost segregation study.
- Does the election apply to storm damage?
- A partial disposition caused by a casualty counts as a disposition even without the election, so the write-off is handled with the casualty rules instead.