Home improvements to a personal residence are generally not tax-deductible for federal income taxes. However, there are some tax-saving opportunities worth considering if you're looking to upgrade your home. Installing energy-efficient equipment may qualify for a tax credit, and renovations for medical purposes may qualify as tax-deductible. Capital improvements can help save money on capital gains tax after selling a home, while certain improvements related to health and energy efficiency can generate tax benefits.
Mark Steber, director of tax information at tax preparation company Jackson Hewitt, told The Balance in an email that home repairs, such as fixing gutters or painting a room, are considered general maintenance rather than capital improvements. To qualify for depreciation of home improvement costs, you must use a portion of your home that is not a personal residence. The two basic requirements that qualify home office improvements for a tax deduction are the regular and exclusive use of space and that your home be the primary place of your business. However, it is first important to understand what types of improvements qualify as capital improvements.
Although your home improvements may not qualify for a tax deduction, Steber recommended keeping detailed records of your expenses related to any home improvement. No, You Can't Deduct Home Improvement Expense with a Home Renovation Tax Credit. However, tax deductions for home improvements are available to make your home more energy efficient or to make use of renewable energy resources, such as solar panels. By adding the cost of the upgrade to your base, your property profit will decrease when you sell it.
Home improvements made for home-based business, energy-saving purposes, and medical accommodations can be deducted from federal taxes in the same tax year in which you spend them. Depending on various criteria related to home improvement, a one-time tax deduction can be requested in a single tax year, extended over several years, or can only be applied when selling the home. Examples of improvements include the addition of a new driveway, a new roof, a new siding, attic insulation, a new septic system, or built-in appliances. The general rule is that home improvements are not tax-deductible. Many exceptions apply to the rule.
Several rules overlap and change every year. Always talk to a tax professional before researching your project to see if it may affect your tax liabilities. He has nearly four years of experience in the area of home improvement and drew on his experience while working for companies such as HomeAdvisor and Angi (formerly Angie's List). Finally, strict rules determine what improvements qualify for tax exemptions and when and how much you can get from a benefit. Most home improvement costs are only deductible from the taxable profit you make on selling your home.
