Are Your Home Improvements Tax-Deductible?
Actually, home improvements aren’t tax-deductible but there are three main exceptions which are capital improvements, medical-care improvements, and energy-efficient improvements.
Capital improvements- It increases the cost basis of your home which in turn reduces the tax bill. This will happen if you make a profit when you sell.
Energy-efficient improvements- With this you can claim a federal tax credit. This hugely depends on where you live, they may lower your state or local taxes as well.
Medical improvements- This can be deductible for medical expenses.
Capital Improvements and Taxes
This improvement will add a huge value to your home and also lower the tax you want to pay.
Below types of improvements will qualify as capital improvements.
Additions: Bedroom, bathroom, deck, garage, porch, patio
Central air, furnace, ducts, central humidifier, central vacuum, air and water filtration, wiring, security, and lawn sprinklers.
Interior: Modernizing the kitchen, built-in appliances, flooring, fireplace.
Exterior: New roof, windows, doors.
Plumbing: Water heater, soft water system, filtration system
Insulation: Attic, walls, floors, pipes, ducts
These capital improvements will save money on taxes if you got a profit on selling your home. This will help you earn a capital gain that equates to your profit on the sale.
Tax Credit for Energy-Efficient Improvements
This tax credit offers credit to the homeowners which is equal to a certain percentage of the cost of qualified property.
- Solar electric
- Solar water heaters
- Geothermal heat pumps
- Small wind turbines
- Fuel cells
The above list is the types of energy-efficient improvements of qualified properties.
Tax Deduction for Home Improvements for Medical Reasons
If the main purpose of a home improvement is providing medical support for you, your spouse or others then include it as a medical expense on your taxes.
The below improvements are examples of medical expenses.
- Modifying fire alarms and smoke detectors
- Adding handrails or grab bars
- Modifying stairways
- Widening doorways at entrances or exits, or modifying hallways and interior doorways
- Installing railings or support bars in bathrooms
- Building entrance or exit ramps
Though home improvements may not qualify for a tax deduction, a detailed record of expenses around your home improvements will be considered.