Home improvements in a personal residence are generally not tax-deductible for federal income taxes. However, installing energy-efficient equipment may qualify you for a tax credit, and renovations for medical purposes may qualify as tax-deductible. If you use your home solely as your personal residence, you can't deduct the cost of home improvements. These costs are non-deductible personal expenses.
No, you can't deduct home improvement expenses with a home renovation tax credit. However, home improvement tax deductions are available to make your home more energy efficient or to make use of renewable energy resources, such as solar panels. The general rule of thumb is that home improvements are not tax-deductible. Many exceptions apply to the rule.
A number of rules overlap and change every year. Always talk to a tax professional before analyzing your project to see if it may affect your tax obligations. Improvements, such as bathroom renovation, kitchen remodel, laundry room extension, or appliance upgrades, add value to your rental property and therefore depreciate. For tax purposes, a home improvement includes any work done that substantially increases the value of your home, increase its useful life or adapt it to new uses.
When you file your taxes, a tax deduction reduces your Adjusted Gross Income (AGI) by the dollar amount of the deduction. The home improvements that produce the greatest tax benefit will depend on your personal tax situation. According to TaxSlayer, some examples of improvements include adding a new driveway, a new roof, a new siding, attic insulation, a new septic system, or integrated appliances. A deduction involves subtracting the amount of the deduction from your income before determining what you owe in taxes, while subtracting a tax credit from the taxes you owe.
You can potentially deduct any remodeling or renovation done to increase the resale value of your home, but you can only claim it in the year you actually sell the home. However, if you keep track of those expenses, they may help you lower your taxes in the year you sell your home. The list of qualifying home improvements changes from year to year, as do the dollar amounts of taxes involved. Installing solar panels or upgrading to energy-efficient windows are examples of energy-saving renovations.
You can include the costs of medical equipment installed in your home if your primary purpose is to provide care for you, your spouse, or a dependent. See the Nolo Network guide to medical tax-deductible home improvements for more information. Because capital improvements increase the value of your home, they can help you save money on taxes if you make a profit selling your home by increasing the base of your property. If the mortgage you take out to buy a home includes additional money to make renovations, the cost of purchasing the home includes this amount.
From retirement account contributions to self-employment expenses, learn more about the five most common tax deductions from the experts at H&R Block. Understanding the distinction between tax deductions and tax credits is essential when talking about home improvement tax reductions.
