Are Home Renovations Tax Deductible?
It’s never a bad idea to look for tax deductions wherever possible around your home. Some of them might just surprise you in how beneficial they are and how much money they can save you on your tax bill. Such is the case with adding solar panels on top of your home to lessen your dependence on grid electric power. Don’t let this fool you though. As a general rule, very few home improvements can be used as a tax deduction. So are home renovations tax deductible? The answer will be no except for in a few rare cases which we will go over below.
Home Improvements Done After Accidental Losses
If you experience a disaster such as a flood or fire, home improvements that are made along with other original replacement repairs are generally tax-deductible. This one can be a little hard for a nonprofessional tax person to figure out the exact amount. That’s because it takes into consideration such things as the amount of money that your insurance company reimbursed you for your loss and federal and state guidelines relating to a particular disaster event.
Handicap Accessibility Home Improvements
These are probably the easiest type of home improvements to use as a tax deduction. That’s because the improvements that you make are medical-related which is an area that state and federal tax authorities are very generous with. So if you make PWD home improvements to bathrooms, kitchens, and bedrooms to better help a handicapped person in your home, there is a very good chance that these will be tax-deductible.
Rental Property Home Improvements and Repairs
You might be able to get tax deductions when you rent out part of your property and your home improvements are related to that. Almost 100% of the time you can use these home improvements as an income tax deduction. Keep in mind that these home improvements must relate somehow to the rental part of your property.
You Work Out of Your Home
When you spend a lot of time at home, then you’re probably coming up with a lot of custom home building ideas. If you work out of your home and make home improvements that help facilitate that, then the majority of the time these improvements can be used as a tax deduction. This would include such things as building a new office or putting on an addition that is used as product storage space or for wrapping up packages.
Your Improvements Were Made to Enhance Your Home’s Salability
So this one might not be a true tax deduction for home improvements made but it can still help you save some money on a home sale. The savings come when the recent renovations are deducted from the profit that you made on your home sale. This happens when you make improvements to your home that make it sell easier and then that home sells shortly after. It does not count if your home sells 2 years after you do the home improvements. This is a tricky one so its best left to a paid tax preparer to figure this out for you.
Ask Your Tax Preparer to Be Sure
You have probably heard the joke that the only things that are certain in life are ‘death and taxes’. More appropriately that should read the only two things that are certain in life are ‘death and that tax laws will change’. Even tax professionals have a hard time keeping up with changes in yearly state and federal tax laws. They are still your best bet when it comes to determining if a home improvement that you made is tax-deductible. So ask a tax professional if your particular home improvement is tax-deductible even if they are not doing your final tax preparation.
Are you looking for Winter Park custom home renovations? Posada Custom Homes is here to help! We also service Orlando and most of the Central Florida area. Call us at 407-740-7707 to schedule a consultation.