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.