While there are many advantages of owning your own home, the cost of maintenance and repair can sometimes be a downer. Yet while some of these costs may be unavoidable, you may wonder if you can claim some of that expenditure against your tax return to reduce the blow. So, is it possible to itemize maintenance or repair bills or even claim some relief if you plan to carry out home improvements? What do you need to know?

Dealing with the Limitations

Unfortunately, you cannot claim the cost of general repair when you file your tax return at the end of the year. When it comes to improvements, you may be able to get some tax benefits but can only take advantage of these when you have sold the property and are looking at your capital gains.

Claiming Improvements When You Sell a Property

When you carry out improvements, you need to show that these will contribute to the property’s overall value (or capital gains).

For example, you may want to build an extension to increase the size of your kitchen or install a new roof. Alternatively, you may want to replace an old HVAC system or even add a swimming pool. In this case, you will need to keep careful records of all the work you perform, and when it’s time to sell the home, you need to add these costs onto the tax basis of the property. When you subtract this figure from the selling price, this will give you your total profit for capital gains purposes. So, the allowable home improvement costs may help you to lower your tax burden at this point.

Understanding the Difference Between Repair and Improvement

It is essential to differentiate between the cost of general repair and improvement. The line can occasionally be difficult to determine, but always ask yourself if the work contributes to the home’s general value or is just something you need to perform to tackle wear and tear. For example, you may need to paint the inside of your home because it’s been some time since you did so or fit a new carpet as the other one has started to become threadbare. These are both examples of general repair costs and cannot be figured into any tax equation.

Taking Advantage of Other Tax Deductions

Still, some other home expenditures may be tax-deductible as part of other tax programs or incentives.

Energy Efficiency

For example, plan some upgrades to your home to make it more energy efficient. You might be able to claim a deduction for the “non-business energy property tax credit.” So, if you intend to install solar panels to reduce your carbon footprint, this may qualify for a tax deduction.

Business Use

If you use part of your home for business purposes and intend to carry out improvements to the specific area in question, you might be able to claim this as a legitimate business tax expense. Many people have chosen to work from home during recent events, and you may want to convert part of a bedroom into a more appropriate office environment.

Rental Income

The situation is entirely different if you own a home for rental income purposes. Here, you will be required to maintain the space for your tenants, so if you need to perform any repairs or maintenance, these costs can be tax-deductible. Likewise, any improvements you make to the value of this property are also tax-deductible.

Selective Depreciation

There may be other ways to claim some tax relief related to property depreciation. There are some very specific rules here, which are outlined in this IRS document.

Keeping Adequate Records

If you think you can claim, you will need to keep a clear record in case the tax authority asks you for the relevant proof. Remember, if you cannot produce the paperwork that details the work and related costs, you may not be able to claim the deduction, even if the work is readily apparent. It’s better to be overly detailed and to err on the side of caution.

Other Questions You May Ask

Are Home Loan Renovations Tax-Deductible?

If you take out a home loan to fund the cost of improving your primary property, you may be able to claim a deduction for the interest segment. This may apply to a mortgage, home equity loan or a line of credit and also if you take out a second mortgage to fund the work. You will need to assess your tax liability and see if itemizing your loan interest would help you claim more than through a standard deduction. You may also need to show that the property in question is listed as collateral for the improvement loan.

What Savings Are Obtained Through Home Maintenance and Repairs?

While it may not be possible to claim a tax deduction for general home maintenance and repairs, you can certainly make savings elsewhere. For example, by repairing a damaged air-conditioner vent, the system will work more efficiently, and you will save money on your monthly energy bill. If you can show that you were a good housekeeper and kept up to date with basic maintenance and repairs, then you should be able to ask for a higher price when you put the property on the market. Your previous work should help you get more interest from buyers as a consequence.

Keeping on Top of Potential Problems

As you may live a busy lifestyle, you may not be able to spend a lot of time looking for problems to be proactive. However, you’ll certainly want to avoid any larger costs in the future because you missed something. In this case, you may want to bring in an experienced inspector instead to carry out a full review of your property and give you advice. Get in touch with Pro Inspect Solutions, no matter where you live in Volusia, Orange, Osceola or Seminole counties. The technicians will help to identify areas for improvement and highlight any necessary work.