Making Finances Simple. Changing Lives.
We’re often asked if home improvements can be deducted on a tax return. The answer depends on the nature of the property.....
If home improvements are made to a primary residence, those improvements are NOT deductible in the year the money is spent. Instead, those expenses can be used to reduce taxes when the home is sold. That’s because improvements increase the basis in a home, effectively lowering the capital gains. However, this is often irrelevant these days due to the Capital Gains Exclusion allowed for primary homes.
If home improvements are made on a rental property, those improvements ARE deductible. However, they must be capitalized and depreciated over several years, rather than fully deducted in the year incurred. That’s why it’s important for landlords to distinguish between improvements and repairs. Whereas improvements are deducted over time, repairs can be fully deducted in the year paid.
In any event, it’s important to keep good records so you have a paper trail of your expenditures.
Feel free to contact us with any of your tax and home loan questions...we’re here to help!
Just last month we had the pleasure of helping a young couple purchase their first home. A few details of interest:
In our clients’ words: “Great experience! With my wife and I expecting our first child within two weeks of our proposed closing date, the team was able to move up the closing date by more than a week and make it stress free in the process.”
Comments are closed.