Are Home Repair Costs Tax Deductible?
Faulty plumbing. A cracked foundation. An old, falling-apart roof. There are all kinds of repairs that a home needs for it to remain habitable.
And since you can’t really live comfortably in a home without those essential repairs taking place, then those repairs should obviously be tax deductible, right?
Unfortunately, the answer is a bit complicated. You see, home repairs do not qualify for deduction. Home improvements, on the other hand, do.
Confused? We thought that you might be. Let’s explore this subject further to get a sense of what constitutes an improvement versus a repair, shall we?
Repairs vs. Improvements
Think of it this way: improvements add to the financial value of your home, while repairs enhance your home’s condition.
To help illustrate this point, think of your home’s HVAC system. If it goes kaput, but the repair guy says it just requires a tune-up to be functional gain, that’s a repair, and therefore doesn’t qualify for deduction.
On the other hand, if your HVAC system is way out of date, and you need to install an entirely new one—adding new vents, new machinery, and the like—to your home, then that definitely constitutes an improvement and could be eligible for tax deduction. Because it represents a substantial investment that raises the value of your property.
If you ever get confused, just ask yourself this series of questions: am I fully replacing something? Does this add value to my property?
If the answer is “Yes,” then, more likely than not, it’s an improvement—and could therefore be tax deductible.
Tax-Deductible Home Improvements
While the criteria are always going to be a bit murky, there are a few tried-and-true home improvements that you can expect to qualify for tax deduction, including:
- Adding a wooden deck
- Kitchen remodeling
- Electrical wiring upgrades
- New bathrooms
- New landscaping
This is by no means an exhaustive list. There are plenty of affordable renovation projects out there to choose from.
If you’re unsure about starting an improvement project, because you’re not certain it will qualify for a deduction, do some more research online—or, better yet, consult your accountant.
And there you have it. The home repair/home improvement tax deduction conundrum in a nutshell!
For the sake of your own financial well-being, as we’ve stated above, please, please consult an accountant on the particulars of your improvement/deduction situation before making any drastic decisions.
You don’t want to be on the hook for money to the IRS, now, do you?
Best of luck to you and yours as you explore tax deductions for homeowners!