{"id":147557,"date":"2023-03-26T00:54:58","date_gmt":"2023-03-26T06:54:58","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=147557"},"modified":"2023-11-06T14:01:26","modified_gmt":"2023-11-06T21:01:26","slug":"can-you-write-off-home-improvements-on-your-taxes","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/can-you-write-off-home-improvements-on-your-taxes","title":{"rendered":"Can You Write Off Home Improvements On Your Taxes?"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm\/?e=BIGPOC3616895163\" width=\"100%\"><\/iframe>\r\n  \n\n\n\n\n<p><span data-preserver-spaces=\"true\">Everyone would love to reduce their tax bill and pay less money to the IRS. But did you know that you can write off home improvements on your taxes? The good news is that certain home improvements can reduce your tax liability. For example, home upgrades that add value to your property, improve energy efficiency, or are adaptations for medical purposes are tax deductible.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Of course, not all home repairs can lower your tax obligations. And there are certain limits on how much you can claim on your tax returns. But capital improvements to your home make you eligible for various <a href=\"https:\/\/www.biggerpockets.com\/blog\/real-estate-taxes-deductions\" target=\"_blank\" rel=\"noreferrer noopener\">real estate tax deductions<\/a> or tax credits.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">As with most tax laws, the rules on writing off home improvements can be complicated. Therefore, this article aims to disentangle the complexities when writing off home improvements on your taxes.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Before learning about home improvement tax deductions, there are a few things to watch out for. First, the rules can change from year to year. Therefore, you should speak with a tax advisor about how much you can write off on taxes. Additionally, your income level can also impact home improvement deductions.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">But before submitting all your receipts from Home Depot to the IRS, it\u2019s crucial to know what is considered home repairs \u2014 non-deductible expenses and home improvements \u2014 tax-deductible expense.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">What is Considered a Home Repair?<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Home repairs are part of regular upkeep and maintenance. Common home repairs include fixing plumbing leaks, patching drywall, replacing appliances, or repainting walls. Unfortunately, typical home repairs are considered ordinary expenses and ineligible for tax deductions. What\u2019s the reason? They cannot increase your cost basis when you sell your home.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Here is a list of common home repairs that do not affect your taxable income:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">Fixing a broken gutter<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Roof repairs or fixing broken shingles<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Replacing a broken window<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Replacing or repairing furniture<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Repairing the HVAC system<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Remodeling a bathroom<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Replacing or restoring the damaged siding<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Resealing a cracked driveway<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Building a new patio<\/span><\/li>\n<\/ul>\n\n\n\n<p><span data-preserver-spaces=\"true\">The only exception to the above list is if you have a home office where your run a business. However, strict limits exist on how much you can write off on taxes.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">What is Considered a Home Improvement?<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Home improvement expenses you can include on a tax return must be connected with capital improvement. They either improve the cost basis in your house, increase its value, improve energy efficiency, or make a home suitable for medical care.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">What <a href=\"https:\/\/www.biggerpockets.com\/blog\/home-improvement-budget-friendly\" target=\"_blank\">home improvements<\/a> are tax deductible? Here are five areas where improving or adapting your property can result in potential tax breaks for homeowners.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">1. <span data-preserver-spaces=\"true\">Energy-efficient home improvements<\/span><\/h3>\n\n\n\n<p><span data-preserver-spaces=\"true\">Energy-efficient improvements are a common tax deduction for homeowners. According to the&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.irs.gov\/newsroom\/energy-incentives-for-individuals-residential-property-updated-questions-and-answers\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">IRS<\/span><\/a><span data-preserver-spaces=\"true\">, you can deduct between 22% and 30% of the cost of installing approved equipment and devices that boost energy efficiency.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Energy incentive home improvements can include the following upgrades:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">Installing solar energy systems&nbsp;<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Geothermal heat pumps<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Installing or improving insulation<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Installing a new furnace<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Biomass fuel stoves<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Small wind turbines<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Energy-efficient heating and air-conditioning systems<\/span><\/li>\n<\/ul>\n\n\n\n<p><span data-preserver-spaces=\"true\">Some energy-efficient improvements like air-source heat pumps, water heaters, and circulating fans allow a tax credit of 10% up to a total cost of $500.&nbsp;<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">2. <span data-preserver-spaces=\"true\">Home improvements to increase the resale value<\/span><\/h3>\n\n\n\n<p><span data-preserver-spaces=\"true\">Any capital improvements that increase your home\u2019s resale value can be included when you file your tax return. What home improvements are tax deductible in this case? Here are a few examples of capital improvement projects:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">Making an attic or basement liveable<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Increasing the number of bedrooms or bathrooms<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Replacing the HVAC system with an energy-efficient system<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Building an addition to the property<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Installing a swimming pool<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">installing storm windows or doors<\/span><\/li>\n<\/ul>\n\n\n\n<p><span data-preserver-spaces=\"true\">It\u2019s good to know that deducting home improvements that increase the resale value only applies when you sell your home. The profit on the house is referred to as \u201ctax basis.\u201d You can then use the deductions to reduce your liability for capital gains tax.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">3. <span data-preserver-spaces=\"true\">Home improvements related to medical care<\/span><\/h3>\n\n\n\n<p><span data-preserver-spaces=\"true\">Deducting home improvements is possible when making adaptations for medical care. For example, installing special equipment, stairlifts, bathroom modifications, or allowing wheelchair access are all eligible tax deductions. In addition, the IRS says that&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.irs.gov\/publications\/p502\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">these medical expenses<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;can be for you, your spouse, or a dependent.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Other examples of acceptable medical deductions include the following:&nbsp;<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">Lowering kitchen cabinets to make them more accessible<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Medical equipment<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Expanding doorways<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Modifying smoke detectors and alarm systems<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Modifying electrical outlets<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Installing grab bars anywhere in the home<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Installing air conditioning to improve the condition of respiratory illnesses<\/span><\/li>\n<\/ul>\n\n\n\n<p><span data-preserver-spaces=\"true\">The tax regulations on the cost of improvements say that you can only deduct medical expenses when they exceed 7.5% of your adjusted gross income. There are also state thresholds for deducting medical expenses.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">What happens if the home improvements for medical care add value to the home resale value? In that case, you can make a partial deduction when writing off home improvements in the tax years when the upgrades took place.&nbsp;<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">4. <span data-preserver-spaces=\"true\">Home improvements for a home office<\/span><\/h3>\n\n\n\n<p><span data-preserver-spaces=\"true\">You can write off home improvements on taxes related to your home office in your primary residence. To be eligible for a tax break, they must be part of your home, the \u201cprincipal place of business.\u201d This can be a portion of your home (like a converted bedroom) or a separate structure (like a converted garage).<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">How does the tax deduction work for home office improvements? The IRS allows you to deduct the percentage of your home that comprises office space. For example, suppose your home is 2,550 sq. ft. and your office is 180 sq. ft. The home office deduction is 7.06% of the improvement costs in that case.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Unfortunately, if you are a W2 employee working from home, you cannot claim the home office upgrades as business deductions.&nbsp;<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">5. <span data-preserver-spaces=\"true\">Repairs if you rent part of your home<\/span><\/h3>\n\n\n\n<p><span data-preserver-spaces=\"true\">You can claim a tax deduction on rental property repairs but not home improvements. This also applies if you rent out a portion of your home. However, it is not easy to distinguish between home repairs and home improvements in a rental property or rented part of your home.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The only way to write off home improvements for a rental property is to depreciate expenses. This way, you can reclaim part of the improvement costs gradually. Therefore, you should speak with a tax consultant before filing returns with deductibles for rental property.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">How to Depreciate Home Improvements<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">You can claim <a href=\"https:\/\/www.biggerpockets.com\/blog\/depreciation-deductions-2022\" target=\"_blank\">depreciation deductions<\/a> if you use part of your home for business \u2014 home office or part of the property you rent out. Depreciation is a way to claim for wear and tear and significant improvements. The depreciation can include 100% of the improvement costs in these circumstances.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Suppose the home office improvements benefit the whole house. In that case, you depreciate the percentage of the property used for business purposes. Also, you can depreciate a rental expense against the rental income. As usual, with these tricky areas of tax returns, you should get advice from a tax professional.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Home Repairs vs. Home Improvements<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">The primary difference between home improvements and home repairs is that repairs generally keep the home in good condition, whereas improvements add to the market value. For example, a fresh coat of paint will not add monetary value to a home. However, building an addition will increase the sale value.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Are Home Repairs Tax Deductible?<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Typically, you can only include home repairs as a tax deduction if they are for part of your home used to run a business. In that case, the cost of repairs is depreciated. Therefore, before making major repairs, research whether they could be classified as improvements. It\u2019s also a good idea to save all payment records and documentation.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Can you write off home improvements on your taxes? The answer is yes. Therefore, it\u2019s vital to keep track of all capital improvement expenses.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">However, not all deductions can be made in the same tax year. For example, home improvement costs related to improving energy efficiency or adapting the home for a medical condition can be filed in the same tax year. But permanent improvements that boost the resale value only yield tax benefits when you sell your home.&nbsp;<\/span><\/p>\n\n\n\n<div id=\"hero-block_62ee867235a1c\" class=\"first:mt-0 hero-block py-4    has-background has-slate-300-background-color has-text-color has-slate-800-color\">\n    <div\n        class=\"gap-10 lg:gap-20 flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 lg:w-2\/3 \">\n            <main class=\"py-4\">\n                \n\n<p class=\"has-theme-slate-color has-text-color has-large-font-size\" style=\"font-style:normal;font-weight:800\">Dreading tax season?<\/p>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-theme-slate-color has-text-color\" style=\"font-size:16px\">Not sure how to maximize deductions for your real estate business? In <em>The Book on Tax Strategies for the Savvy Real Estate Investor<\/em>, CPAs Amanda Han and Matthew MacFarland share the practical information you need to not only do your taxes this year\u2014but to also prepare an ongoing strategy that will make your next tax season that much easier.<\/p>\n\n\n\n<div id=button-custom-event-block_641384b1eb1d8 class='button-custom-event'>\n      <a href=\"https:\/\/store.biggerpockets.com\/products\/tax-strategies-book-bundle?utm_source=blog&#038;utm_medium=blog%20banner\" x-on:click=\"window.analytics.track(&#039;Blog Block | Publishing: Taxes Bundle&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/can-you-write-off-home-improvements-on-your-taxes&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-gold-background-color has-text-color has-white-color\" target=\"_blank\">Get Yours Now<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n                <div class=\"lg:w-1\/3 first:mt-0 relative h-full lg:flex lg:items-center\">\n            <img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  rounded-md hidden lg:block\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2023\/04\/tax-strategies-books.png\" alt=\"\" title=\"\">\n        <\/div>\n            <\/div>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>Everyone would love to reduce their tax bill and pay less money to the IRS. But did you know that you can write off home improvements on your taxes? The [&hellip;]<\/p>\n","protected":false},"author":613648,"featured_media":147558,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7377,7119],"tags":[],"class_list":["post-147557","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-tax-strategies","category-biggerpockets-daily"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/147557","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/613648"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=147557"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/147557\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/147558"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=147557"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=147557"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=147557"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}