Can You Write Off Home Improvements?
Let’s be honest, home improvements can be expensive. From minor improvements, like repainting the walls, to major improvements, like building additional rooms, changing or adding to your home is never a small, inexpensive task.
With how much these upgrades or changes can cost, are home improvements tax deductible? In short, most home improvements are not tax-deductible, but there are a few exceptions.
What Type of Home Improvements Are Tax Deductible?
There are five home improvements that are tax-deductible in one way or another. With most of these improvements, the deduction can come after you sell your home and not when you file your taxes each year. Other improvements that may offer tax deductions are credits, though. What are these home improvements that are tax-deductible?
- Capital improvements – improvements that add value to your home
- Energy-efficiency improvements – improvements that save on energy, including gas and electricity
- Medical care improvements – improvements necessary to provide better medical care
- Home office improvements – improvements necessary to do your job if you are self-employed
- Resale improvements – additional improvements that add value to your home
Before you go running off to start performing these types of improvements to your home, you should know first. We’ll explain further, so keep reading to learn how the five following home improvements can save you money.
Capital improvements are upgrades that add value to your home. These improvements can help lower the tax you pay on the money made from selling your home. Below is a list of capital improvements:
- Systems: heating, air conditioning, water and air filtration, home security, and sprinklers
- Additions: bedrooms, bathrooms, garages, porches, and patios
- Yard: landscaping, fencing, swimming pools, driveways, and support walls
- Exterior: New roofing, new windows and doors, new siding, brick, or stucco
- Insulation: Walls, floor, attic, plumbing, and sound
- Plumbing: Water heater, water softener, water filtration, and new piping
Although this list doesn’t cover all capital improvements, it does provide a good example of what you can do to save on taxes when you sell your home.
The Difference Between Capital Improvements and Home Repairs
What about home repairs? Are home repairs tax deductible? Unfortunately, they are not. In most cases, capital improvements are much more extensive projects than a home repair. Think of replacing a leaky bathtub versus adding a completely new bathroom to your house.
In some instances, some home repairs can take quite a bit of time and be just as expensive as capital improvements, yet, capital improvements are meant to add value to your home, whereas home repairs maintain value.
Energy Efficiency Improvements
Certain energy efficiency improvements can qualify for a tax credit. This tax credit is a percentage of the cost of the type of equipment you installed in your home. The percentage is also determined from the date you installed it. Here are a few examples of energy efficiency improvements that qualify for a tax credit:
- Solar panels
- Solar water heaters
- Wind turbines
- Fuel cells
- Energy-efficient windows
- Furnace circulating fan
- Energy-efficient furnace or boiler
It’s important to remember that a tax credit is different from a tax deduction. A deduction is a specified amount of money subtracted owed before taxes, while a credit is a specified amount of money subtracted from the taxes you owe.
Each energy efficiency improvement qualifies for a different tax credit amount. We recommend talking with an accountant or your local energy provider for more details on what tax credits you may qualify for.
Improvements you make to your home to better medical care for yourself or a family member may be tax-deductible. These types of improvements may be treated like medical expenses which you can take into account while filing your taxes. A few of these improvements include:
- Installing home entrance and exit ramps
- Installing support bars in your bathroom
- Widening hallways and doors for wheelchair accessibility
- Adding stair lifts
- Lowering or modifying kitchen and bathroom cabinets
If you need to make home improvements to provide medical care and assistance to a loved one, you can see which improvements qualify for a tax deduction.
If you are self-employed and need to make home improvements to your home or home office for work-related needs, you may qualify for additional tax deductions. Although it can get tricky to know exactly what improvements are tax-deductible, here is a list of common improvements:
- Home office space repairs
- Home office space improvements
- Home repairs not directly related to your workspace (partially deductible)
- Home improvements not directly related to your workspace (partially deductible)
The big thing to remember with home office improvements is that they have to be made to be related to your business. In some cases, since your home would be your “office space” other home improvements are tax-deductible, as well.
We always recommend talking with a certified public accountant to know which tax deductions you are eligible for.
Similar to capital improvements, resale improvements add to the value of your home, which can save you on the taxes owed by selling your home. Since you wouldn’t be the original owner of the home, any additional improvements you make to increase the value of the home would be known as resale improvements. Here are several examples of resale improvements:
- Adding a swimming pool
- Installing a new furnace
- Finishing a basement
- Building an addition to your home
- Adding a new bathroom
As we previously mentioned, these home improvements are not tax-deductible, but they can keep you from paying the full tax amount on the money you make from your home sale.
Home improvements are always a great way to not only make your home feel new but to add value, especially additional bathrooms or other large improvements.
An Alternative to Home Improvements
If you’re looking to make a change to your home, consider getting a new build! At Next Level Homes, we take pride in the quality and beauty of our builds. For years we’ve built homes across the Wasatch Front and know what it takes to build a home that will last a lifetime. We have many different models to choose from, all with spacious and open floor plans and modern, timeless designs.
Ready for something new? Then click on the button below and we’ll help you find the next home improvement—your new home!
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