Tax code is a complex web of rules and regulations. Things you would never expect to be tax deductible are, while others that you might be certain are tax deductible are not. So, are home improvements tax deductible?
No, they are not ordinarily tax deductible. But that is not the full story.
What Home Improvements Are Not Deductible?
Home improvements will not count as tax credits on a home that you are currently using yourself. Whether it is a home you live in year-round, or a beach house you live in during the summer, these are the kinds of homes that you get no tax credit for improving.
However, you can get tax credit for the improvements you make to a home (or part of a home) that you use as part of a business.
If you sell a home, for instance, or if you rent it out during certain parts of the year, then the improvements you make to it become business expenses.
What kind of improvements count as the kind that will give you tax deductions?
Well, so long as the improvements extend the life of the home, or adapt it to new situations, the improvement will count as a tax deduction. Sadly, this means that luxuries like entertainment systems and saunas do not count as tax credits.
Interestingly, the definition of “improvements” in the context of taxes is rather specific. If you repair your roof or prepare it for harsh weather, that counts as an improvement that can be tax deductible if you sell or rent out the home.
If you call an exterminator to clear the house of bed bugs, rats, or termites, that can also count.
But what if you do not have a second home to rent out?
What if you do not plan to sell your current home before the end of the year? Is there anything you can do?
Well, yes. Odd as it is, if you register your home office as a part of your business, then money that you spend on that office is tax deductible. Sadly, this does not come with as many loopholes as you might think it does.
You cannot just install a new entertainment system, call it your office’s break room, then expect to be able to write that off as tax deductible.
A good example of how the office deductions work is thinking of replacing your roof or windows. If you replace five windows, but only one window for your office, then 20% of the cost of those window replacements is deductible.
One very important note: Improvements can only be deductible if they exist at the time taxes are incurred. So, if you install weathering on your home, but that weathering is gone by the time you sell your home, then you cannot use that weathering as a tax deduction.
Taxes are a truly dizzying maze of rules and regulations. While home improvements are not meant to be deductible, doing so is still possible.