Tax season is here, and we know that preparing your taxes and understanding which expenses you can deduct can be confusing, especially if you invested in a major home renovation project during the past tax year. If you’re currently in this position, you’re likely to have plenty of questions, from “can you write off home improvements?” to “can I claim a kitchen remodel on my taxes”.
There are rules around whether or not you can deduct the cost of home improvements. This blog post is designed to help you identify if you can in fact write off home improvements and claim a kitchen remodel on your taxes.
Questions to Determine: Can I Claim Remodeling on My Taxes?
We’ve created a series of questions and answers to help you figure out if your house upgrades are tax deductible.
Is this a remodel or repair?
Repairs are not tax deductible; if you’ve had to invest in a major plumbing fix in your kitchen or bathroom, this cannot be deducted. On the other hand, a remodeling project may be tax deductible. So, can home repairs be deducted from taxes? Unfortunately not, but by treating yourself to a remodel, which would take care of any issues and upgrade your home, you may potentially be able to benefit from tax deduction.
A full kitchen remodel. Be sure to consider whether your renovations permanently alter the home or if they are just minor improvements.
Is your home a personal residence only? Or do you have a home office?
If your home is only used as a personal residence, then you cannot deduct the cost of any home improvements.
However, home office improvements are tax deductible, so if you or someone in your family uses your home as an office for a legitimate business, then you could qualify for a home office deduction.
Improvements that only benefit the home office, like installing shelves or lighting in the office itself, can be deducted 100%. Any improvements made to your entire home can be deducted based on what percentage of your home is taken up by your home office. For example, if 25% of your home is used for remote work, 25% of the cost to upgrade your heating and cooling can be deducted from your taxes.
Do you rent out your home?
If you rent out your home, either partially or fully, you can deduct the cost of home improvements from your rental income. This process is similar to calculating how much of your home office improvements are tax deductible; you may only deduct improvements that benefit the portion of the house that is being rented. If the improvements benefit the whole house, deductions can only be made based on the percentage of the rented space.
Did you sell your home or are you selling your home soon?
When you sell your home, you can write off home improvements if you meet the requirements. Typically, to qualify for a tax deduction your home improvement has to add to the value of your home, extend its lifetime, or enable you to use your home in new ways.
A beautiful new home addition. Any major home renovations made before you sell could significantly reduce your profit from the selling price, and ultimately your taxes.
Always Keep Financial Records
Whenever you complete a major kitchen or bathroom renovation, build a home addition or upgrade any other part of your home, it’s important to keep financial records. When the time comes to review your tax deductions, you will want to have documents and receipts of every project you’ve worked on over the past year.
These tips should help you get started with approaching your finances, and help you identify potential home improvements you can claim on your taxes. As always, contact a tax specialist or CPA for expert advice tailored to you, to complete your tax return.
Get Started on Your Next Remodel
Reliable Home Improvement can help you upgrade your home with potentially tax-deductible bathroom and kitchen remodeling projects, home addition builds, home office upgrades and more. To get started on your design-build project, contact Reliable Home Improvement today.