Know the Tax Differences Between a Home Repair and Home Improvement

Know the Tax Differences Between a Home Repair and Home Improvement

We homeowners love all the tax breaks the IRS gives us. When we make improvements to our home, we can use those expenses to offset some taxes when selling. Home repairs, unlike improvements, aren’t deductible at time of sale though. Here’s a quick way to know which costs you can deduct.

Over at Don’t Mess with Taxes, they explain the differences:

For work on a personal piece of real estate to have any tax value, it must add to the property’s value or prolong its life. These are classified as home improvements.

You and I likely will argue that a working kitchen faucet does indeed add value to our homes, but the Internal Revenue Service is unpersuaded in this area.

Instead, the federal tax man says general upkeep tasks like my faucet repair simply keep or return a home to its original good condition, rather than qualify as tax-reducing improvements to the residence.

Tax-saving capital improvements have to last for more than one year and add value to your home, prolong its life, or adapt it to new uses.

We’d like to deduct everything we think adds value to our home, but the IRS disagrees. You’ll need to consult a tax advisor to know for sure, but this is a good rule of thumb to help understand the difference.

Tax differences between home repairs & home improvements | Don’t Mess With Taxes

Photo by Karin Dalziel.


via Lifehacker
Know the Tax Differences Between a Home Repair and Home Improvement