4 Home Improvement Projects that Are Potentially Tax-Deductible

Table of Content

• Which types of home improvements get the best tax breaks?
• Most Common Improvements
• Are Home Repairs Tax Deductible?
• Home renovations made for medical purposes may be tax deductible

Tax deductions reduce your taxable income and lower your overall tax liability. The IRS allows tax deductions on medical expenses related to "the diagnosis, cure, mitigation, treatment, or prevention of disease" — but not until the expenses exceed 7.5% of your adjusted gross income. Medical renovations are usually treated as tax deductions rather than credits.

If the whole thing seems confusing to you, it’s never a bad idea to consult a professional. A licensed accountant or tax professional will be able to properly guide you on your home improvement journey. In no time at all, you’ll be well on your way to both upgrading your home and enjoying the financial benefits, too. The most common improvements to make include updating kitchen cabinets, adding rooms or bathrooms, and replacing doors and windows.

Which types of home improvements get the best tax breaks?

To illustrate, assume you purchased your home for $350,000 and later sold it for $650,000. However, you made improvements of $150,000 during your stay, bringing your tax basis to $500,000. In this situation, you’d only have to pay taxes on a gain of $150,000.

However, installing energy efficient equipment may qualify you for a tax credit, and renovations for medical purposes may qualify as tax deductible. Tax deductions for capital improvements can only be realized when the house is sold. The renovation’s value, or a percentage, is added to the investment cost of the home.

Most Common Improvements

Compare the adjusted cost basis with the sales price you get for the house. Get live help from tax experts, plus a final review before you file — all free. If you’re buying a home, you can reduce the costs of your renovation project by making the changes when you purchase the home.

If your total income tax is $5,000 and you have a refundable credit of $6,000, the credit will erase the tax due and you'll get $1,000 back. Our stories are reviewed by tax professionals to ensure you get the most accurate and useful information about your taxes. Many or all of the offers on this site are from companies from which Insider receives compensation . Advertising considerations may impact how and where products appear on this site but do not affect any editorial decisions, such as which products we write about and how we evaluate them. Personal Finance Insider researches a wide array of offers when making recommendations; however, we make no warranty that such information represents all available products or offers in the marketplace. Consult a tax professional to discuss your projects to understand how the ever-changing tax laws will affect your current and future tax situation.

Are Home Repairs Tax Deductible?

If your home is purely a personal residence, you can’t deduct the cost of improvements because it’s written off as personal expenses. However, this does not mean there’s no tax benefit for making major improvements. Our Full Service Guarantee means your tax expert will find every dollar you deserve. Your expert will only sign and file your return if they know it's 100% correct and you are getting your best outcome possible.

For instance, energy-efficient improvements, if you put solar panels on your roof, or you replace your windows or doors with more energy-efficient options, can create credits for you. A working understanding of property taxes is necessary to take advantage of home improvement tax benefits. This way, you’ll make strategic decisions that qualify for tax benefits.

Medical Care Improvements

Jacqueline has been published on LendingTree, Credit Karma, Fundera, Chime, MagnifyMoney, Student Loan Hero, ValuePenguin, SoFi, Northwestern Mutual, and more. This applies to a profit of $250,000 for a single taxpayer and $500,000 for a married couple filing jointly. Sometimes a mortgage will also include money for any changes you need to make. Lexie is an assistant editor who is responsible for writing and editing articles over a wide variety of home-related topics.

According to TaxAct, “for a mid-range kitchen remodel, you’ll recoup about 57 percent of the cost. For a mid-range bath remodel, you’ll recoup about 70 percent of the cost.” A realtor will know what upgrades will garner you the most profit when it does come time to sell your home. You may deduct these over time through the use of MACRS depreciation. Depending on the improvement made, you will need to follow a specific, relevant depreciation schedule to deduct these expenses over their expected useful lifetime.

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In other words, your $50,000 expense boosted your property value by $10,000 but most people don't really value an elevator, so it's not giving it the full 50. Well, that $40,000 becomes a medical expense that could potentially be deductible on your return if it, along with your other medical expenses, exceeds seven and a half percent of your AGI. If you use your home purely as your personal residence, the answer is "no." You can't deduct the cost of home improvements. Learn which home improvements are tax deductible and the limitations you can write off in this guide to home improvements tax deduction.

Are new gutters tax deductible?

Depending on several criteria related to home improvement, a tax deduction might be claimed all at once in a single tax year, spread out over several years or it may only apply when selling the home. In a perfect world, home improvements would all be tax deductible. While the world remains far from perfect, the recently enacted federal Tax Cuts and Jobs Acts may provide relief for homeowners in need of seamless gutters. When executing a home upgrade that might be tax-deductible, make sure you keep track of all important documents and payments. "You want to keep good records for any improvements made to your home," advises Kemberley Washington, tax analyst for Forbes Advisor.