Are home improvements tax deductible? Everything about tax deduction!

 

 

Improving your home will always increase the value of your home. But do you know that these improvements or expenditure you spend on home improvement can also help you by lowering the tax bill when you sell your home?

Yes, it’s all true! These are the questions heard most of the time: ‘Are home improvements tax deductible?’ or ‘What improvements are tax-deductible?’ Now, if you have recently renovated your home, these questions are so important. And here in the article, you’ll find all the answers you need. Let’s get them one by one.

 

Are Home Improvements Tax-Deductible?

If this is a Yes or No question, then the answer will be Yes! But it is much more complicated. It depends on which project or what kind of project you are completing. This can be home repair or home improvement.
Repair and Improvement are not the same, although some people think so. An improvement is increasing the value of your home by modification. An example of an improvement can be adding a new driveway or new siding or any other built in appliances.
Most of these improvements are tax-deductible in the selling year. If you improved anything in 2017 an sell it in 2020; the tax deduction may be eligible on the 2020 taxes.
On the other hand, a repair is just modification, which allows you to restore to its original value. Repairs often happen in our houses. An example of repair can be fixing a whole on carpet or replacing something broken.

Except for some of the cases of home offices or rental properties, which is yours are not tax-deductible. So, as per this, the tax deduction is only allowed for the improvements.

What Are Home Improvements Tax-Deductible?

Energy-Efficient Renovations

Some of the tax credits for energy-related home improvements have changed in the 2018 tax season. The change in tax law reduced the qualifiers for the Residential Renewable Energy Tax Credit, leaving improvements for social energy intact.

According to the new tax law of 2017, wind, fuel cell improvements are good. Also, the soil credit will remain up until 2019 and will reduce every year till 2021.

However, if you put solar energy systems on your new home or the existing one, it will also help deduct 30% of the total cost of installation. This credit is available in both primary residences and newly constructed homes.

Never forget that the most eligible improvements for the energy efficiency can only be credited within the same year not deducted.

Here are some Tax-Deductible eligible Home Improvements for Energy Efficiency:

  • Solar panels.
  • Solar water heaters.
  • Small wind turbines.

Home Improvements for Medical Care

Home improvements for medical care can be tax-deductible. But it can be hard to come by. You can still do this by planning on aging the place with a little help from your doctor. It can bring the deduction in full. You are free to include expenses on the installation for the medical equipment in your home only to provide care for you or a dependent.

These improvements for medical care are fully deductible expenses because they do not add value to the home.

Some Tax-Deductible Home Improvements for Medical Care:

  • Widening your hallways and doorways.
  • Lowering/modifying the cabinets in a kitchen.
  • Modifying the fire alarms, smoke detectors, and other warning systems of your home.
  • Building the entrance and exit ramps.
  • Adding special lifts to get from one floor to another.
  • Installing the support bars in a bathroom.

Home Office Improvements

Many ask if Home office deduction has gone away or not in 2018, and the answer is no. You can also say not entirely. That means it is tax-deductible, but there have been some huge changes in the recent tax law update.

The employees who maintain their working space apart from the outside employer’s tax deduction in-home office is no longer available for them. But there will be a deduction for self-employed or for them who run their business.

You may know that home office improvement is deductible with time. It happens through depreciation.

Some Tax-Deductible Home Improvements:

  • Improvements are made directly to your office (fully deductible).
  • Some improvements are made to other parts of the home (partially deductible).
  • Repairs are made to other parts of the home (partially deductible).
  • Repairs are made directly to your office (fully deductible).

Rental Property Renovations

This is where the repairs versus improvement rules (described in previous) get a little complicated. In the case of rental properties, repairs are also deductible as they are categorized as essential to the upkeep of a property. In other cases, the improvements like renovating the drawing-room add value to the property, which allows depreciation over time that means the costs are deducted with depreciation.

Some Tax-Deductible Home Improvements (or Repairs):

  • Additions to the property (deductible over time and with depreciation).
  • Any upkeep is necessary to maintain a habitable space for your tenants (fully deductible).

Improvements for Resale Value

When you are selling your home, the improvements for Resale Value become tax-deductible. It includes major improvements of home or an increase in the home’s value. It can be hard to keep track of the expenditure, including the cost of labor.

Some Tax-Deductible Home Improvements:

  • Finishing a basement or attic.
  • A new addition to your home.
  • Adding a swimming pool.
  • Installing a new furnace.
  • Creating a new bathroom.

Final Verdict

When you are selling your home, the improvements for Resale Value become tax-deductible. It includes major improvements of home or an increase in the home’s value. It can be hard to keep track of the expenditure, including the cost of labor.

Some Tax-Deductible Home Improvements:

  • Finishing a basement or attic.
  • A new addition to your home.
  • Adding a swimming pool.
  • Installing a new furnace.
  • Creating a new bathroom.

Patrick Germain

Patrick Germain

Patrick Germain is a professional Home Improvement Advisor. Also studied Residential Construction. Also, love to write and share more about authentic home improvement and residential construction. Feel free to reach him and ask more about related topics.

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