Home improvements to a personal residence are generally not tax-deductible for federal income taxes. However, installing energy-efficient equipment may qualify 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 cannot deduct the cost of home improvements. These costs are non-deductible personal expenses.
No, you can't deduct your 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. 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. 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. The good news is that some home improvements can improve your living space and also benefit from your taxes.
The following table describes what percentage of the cost of home improvement qualifies based on the year in which the improvements occurred. Finally, strict rules determine what improvements qualify for tax exemptions and when and how much you can get from a benefit. Depending on the improvement made, you will need to follow a specific and relevant repayment schedule to deduct these expenses over their expected useful life. If you rent your home to short-term renters or guests, you may be able to deduct the costs of upgrading a larger part of your home, such as the kitchen, living room and dining room, than if you only had a home office.
Any improvement made to your home that increases the resale value is tax-deductible, but not only in the year it is made. Shower handrails, wheelchair ramps, wider doors and aisles, and any other improvements made for medical purposes are tax-deductible. 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. Improvements that benefit the entire home can be depreciated according to the percentage of rental use of the home.
If you need to make improvements to your home to meet your medical needs, whether it's rental or property, you can deduct the cost from your federal tax bill. A capital improvement is something that adds value to a home, extends its useful life or adapts it for a new use. In real estate, an improvement is anything that increases the value of the property, adapts it to a new use, or substantially extends its useful life. Who knows, getting more money from the IRS could even be the start of your next home improvement project.
The federal government allows you to take deductions if you upgrade your home with energy-saving materials or equipment.