Real Estate & Taxes:

Deducting Home Improvements

There is a fine line between improvements and repairs on your home when it comes to the IRS. Improvements to the house are tax deductible and even help you pocket more gain when you sell the house. Repairs are not considered tax deductible because they are necessary.

According to the IRS, "improvements to the home add to the value of your home, prolong its useful life, or adapt it to new uses. You add the cost of improvements to the basis of your property." Hence, when you sell it, the property has appreciated in value, and if you are married you can pocket up to $500,000 of the gain and $250,000 of the gain if you are single without paying a penny in taxes on the gain. It's all tax exempt.

But be careful; don't try to count repairs as improvements to your home. According to the IRS, "Repainting your house inside or outside, fixing your gutters or floors, repairing leaks or plastering, and replacing broken window panes are examples of repairs." Meaning anything that keeps the house in good condition but doesn't add to the basis of the property is a repair not an improvement.

So instead of repairing, replace products in your home. Make it look good if you want to sell the house in a few years and reap the fruits of your efforts when you make a good profit on the house and all the money goes in your pocket, not to the IRS.

Following is a list of improvements you can make to your home:

Additions Lawn & Grounds Miscellaneous
Heating & Air Conditioning
Interior Improvements
Storm windows, doors
Heating system
Septic system
Built-in appliances
New roof
Central air conditioning
Water heater
Kitchen modernization
Walls, floor
Central vacuum
Soft water system
Pipes, duct work
Wiring upgrades
Duct work
Filtration system
Wall-to-wall carpeting
Retaining wall
Satellite dish
Central humidifier
Sprinkler system
Security system
Filtration system
Swimming pool