I have a home-based business. Do I deduct or depreciate the cost of a new roof for my home?

I have a day care business that I run out of my home. I take care of 2 children only. I have been doing this for the last 6½ years. We just put a new roof on the house because of leakage problems. Can I deduct the entire amount of the new roof from my taxes this year, or do I have to depreciate it?

Just like a home office, you can depreciate a portion of the costs for the roof, but only the portion of the roof, on a percentage basis, that exclusively houses the day care center. If you do not have an area exclusively dedicated to providing the child care, then you have no deduction.

However, the replacement of a roof is a "capital improvement" that will substantially extend the life of the home. The cost of a capital improvement is always depreciated, never deducted. Only minor repairs or maintenance can be deducted in fully in the year the expense is made; for instance, if you had replaced a few shingles on the roof or retarred a few spots, you would be able to currently deduct the full amount of the repair.