You’ve spent the past year renovating your home, and things are coming together. Now that your house is in order, it’s time to get your financial house in order, too. All the hard work that goes into your home comes with a financial cost, but you may be able to get some of your investment back come tax time. Be sure to keep records of all the expenses, as they’re your ticket to some sweet savings.
For tax purposes, a home improvement is anything that adds substantial value to your home, increases its useful life, or adds new uses. Examples include replacing the roof, adding fencing, landscaping, adding an addition, renovating the kitchen or bath, replacing heating or plumbing, or a new driveway or walkway.
The IRS makes a key differentiation between home improvements and home repairs. A minor repair to your roof, gutters, windows or plumbing to fix a small issue won’t qualify for a tax break, as these minor upkeeps are far too common to keep the Treasury afloat.
If you use your primary residence as your business or rent out part of your home, you may qualify for a special deduction. You can deduct all of the repair costs to your home office or business space, but only the portion of your home that is used for business. Replace a broken window in your home office and you can write it off; a broken window in your bedroom cannot. For major upgrades to the whole home, such as replacing a roof, you can write off a percentage based on how much area of your home is devoted to your business or rental.
It is critical that you keep records of all the costs put into renovating your home, whether you work there or not. Most home improvements will net you a tax savings, but you’ll need to itemize your deductions to take full advantage. A tax professional or even software such as TurboTax can walk you through these deductions and help you find out how much money you can get back from your home improvements.