New Tax Laws: Expenses or Capital Improvements?

[Jerry Kisasonak]

I am trying to get a handle on the new taxes codes in regards to expensing versus capitalizing and depreciating. I have heard that the new laws basically state that "replacing" something such as a roof, AC unit, etc is now expensed (written off 100% in the year it was done) versus the old way, which was to add the amount paid for the replacement to your cost basis and depreciate the improvement over time.

From what I understand, the IRS is saying that since you already bought the roof when you purchased the home replacing the roof isn't really considered an improvement anymore - and it is written off like you'd write off something cosmetic like paint. I suppose the gist of it is that if it's a replacement of something its an expense, and if its an addition its a capital improvement - like putting a deck on where one didn't previously exist.

Is this accurate? If it is, the impact this has on our cost basis is significant. We could no longer increase our cost basis by doing basic renovations when we buy and this will lead to less that we can write off in depreciation, which translates to more taxes we'll pay on our cashflow. On the positive side, we'll be able to take 100% of the losses/expenses as they happen, which would even things out if we are continually buying and renovating properties. I am thinking correctly on this? Thanks in advance for the feedback!