Real Estate & Taxes:

Deducting Home Improvements

There is a fine line between improvements and repairs on your client's home when it comes to the IRS. Improvements to the house are tax deductible and even help your client pocket more gain when they 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 your client sells it, the property has appreciated in value, and if they are married they can pocket up to $500,000 of the gain and $250,000 of the gain if they 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 client's 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, advise your clients to replace products in their home. Make it look good if they want to sell the house in a few years and reap the fruits of their efforts when they make a good profit on the house and all the money goes in their pocket, not to the IRS.

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


Lawn & Grounds
5.Retaining wall
6.Sprinkler system
7.Swimming pool

1.Storm windows, doors
2.New roof
3.Central vacuum
4.Wiring upgrades
5.Satellite dish
6.Security system

Heating & Air Conditioning
1.Heating system
2.Central air conditioning
4.Duct work
5.Central humidifier
6.Filtration system

1.Septic system
2.Water heater
3.Soft water system
4.Filtration system

Interior Improvements
1.Built-in appliances
2.Kitchen modernization
4.Wall-to-wall carpeting

2.Walls, floor
3.Pipes, duct work