Home improvements to a personal residence are generally not tax-deductible for federal income taxes. However, there are certain exceptions that may qualify for a tax credit or deduction. If you use your home solely as your personal residence, you cannot deduct the cost of home improvements. These costs are non-deductible personal expenses.
But don't worry, there are still ways to save on home renovation costs. One way is to make home improvements at the time of purchase. If the mortgage you take out to buy a home includes additional money to make renovations, the cost of purchasing the home includes this amount. You may also be able to deduct home improvement costs if you use your physical home to earn money.
Any improvements made to the part of the home you do business in may qualify as federal tax deductions. Additionally, renovations that make your home more energy efficient or that make use of renewable energy resources, such as solar panels, may qualify for a tax credit. Renovating a home can also help minimize taxes when it comes time to sell. Because home renovations increase the foundation of your home, they can help lower the amount of your sale price that is counted as a benefit, and thus can help you become subject to the home sale exemption to avoid capital gains altogether.
It's important to thoroughly document any tax-deductible home improvements you make along the way so you can get the most out of your money when the time comes. Always talk to a tax professional before researching your project to see if it may affect your tax liabilities. Several types of home improvement projects may be eligible for a tax write-off, but ultimately, it all depends on the type of remodel you're completing and whether it's classified as a repair or improvement. Home improvements made for home-based business, energy saving purposes, and medical accommodations can be deducted from federal taxes in the same tax year in which you spend them.
The cost of most home improvements is deductible from the federal taxes you owe on the profits you make selling your home.