Are Your Home Improvements Tax-Deductible?
Some home improvements are definitely tax-deductible, and that means you should lean toward doing those types of projects, because you’ll end up saving some money by doing them. In order to determine which renovations are tax-deductible, it will be necessary to categorize them as either repairs or improvements, with improvements being the class of projects that are more likely to be tax-deductible. The IRS classifies anything that restores a property to its original condition as a repair, and for the most part repairs are not tax-deductible.
On the other hand, home improvements are considered to be alterations that increase the value of your home, and are therefore largely tax-deductible. Such projects include things like installing a new driveway, a new roof, new appliances, attic insulation, or new siding on the home. You may need to do some research however, because some kinds of home improvements can only be applied during the year that a house is sold. That means whenever you do undertake legitimate home improvements, you should be sure to document it thoroughly, because you may only be able to claim the tax deduction several years later at resale time.
Here are some of the most popular tax-deductible renovations:
- Energy-efficient renovations – some examples of these types of renovations include installing residential wind turbines, solar panels, solar water heaters, and replacing doors and windows
- Medical care home improvements – these kinds of home improvements are generally used when seniors plan to age right in their homes. Some safety features may need to be installed, and some accommodations may have to be made for reduced mobility. Typical improvements are adding more smoke alarms and detectors, adding lifts between floors, support bars in the bathroom and elsewhere, widening doorways and hallways, modifying kitchen cabinets for accessibility, and installing ramps for entering and exiting.
- Home office improvements – in order for a space to be classified as a home office, it must be used exclusively as an office, and it must be used regularly as an office. If you’re self-employed and run your own business, you can deduct almost all expenses related to your home office. Any repairs or improvements made to your home office, as well as some other improvements made to other areas of the home are completely deductible.
- Rental property renovations – any kind of repairs or improvements which become necessary for providing a habitable place for tenants are generally deductible. Any rooms which get added or upgraded are deductible over a period of years.
- Home improvements for resale – capital improvements that increase the value of your home are usually deductible. Some examples include finishing an attic or basement, adding a new bathroom, installing a new energy-efficient furnace, putting in a swimming pool, and building an addition on to your house.
Most popular renovations
Some of the most popular tax-deductible renovations undertaken by homeowners are those which involve replacing doors and windows with new energy-efficient products. The reason for their popularity is because much of the cost can be reduced through incentives and rebates, and in the meantime, your household receives the benefit of lower utility bills. Other renovations are popular as well, but you may not get the same bang for the buck with them.