So you purchased a home and you loved everything about it- except the awful cabinets in the kitchen. And the seashell-shaped bathroom sinks. And the weird carpet throughout. But otherwise, it was perfect. All of the upgrades and renovations will cost you hard earned money, but come tax time, what improvements are tax breaks? We've broken down some common repair-related tax questions here.
Repair versus Improvement- A repair is bringing the house back to the same condition it was in, but doesn't necessarily make it better than before. For example, painting a home a more neutral color is great for resale, but doesn't make the house better. An improvement can make your home better and increase the resale value and a portion of that expense can be deducted. For example, replacing a furnace or adding storm windows does increase the sale value. For a complete list of allowable improvements, check out this pdf from the IRS (page 12).
Can I deduct Home improvement costs? Maybe. If you had to add a ramp, a special shower stall, or something else to accommodate a disability, then you might be able to deduct the cost through a medical deduction.
What about my home office? If you made improvements to your home office, and the space meets the requirements, you can take the deduction.
Do I qualify for energy efficient upgrade credit? You may qualify for an energy tax credit. The Residential Energy Efficient Property Credit is equal to 30% of the cost of the qualified equipment (wind turbines, solar water heaters, and solar electric equipment). Not all energy efficient equipment qualifies.
As with all tax-related information, please contact a tax professional if you have any questions. If you are going to be buying or selling a home, it may be a good idea to speak with a tax pro now in order to best prepare for the house sale.
If you have any real estate related questions, please don't hesitate to ask. Call us at 775-453-0209 or message us here.