If you are wondering ‘Can you write off home repairs on your taxes?,’ the short answer is yes. Take that, Uncle Sam! And by Uncle Sam, we mean the friendly relative who will be renting space in your new guest room / tax shelter.
The longer answer, however, is a more qualified yes: you can write off many home improvements, but not all home improvements. Here are some home upgrades that, based on the current U.S. tax code, should jump to the top of your to-do list:
Can you write off home repairs on your taxes? Yes, if you make your house more accessible.
Use a mobility device? Does someone in your home? You may be able to deduct the cost of wheelchair ramps and stair access points. Deductions must be medically necessary and not aesthetic in purpose – you can’t put in a ramp because it looks cool. Adding in an accessible shower stall and lowering the height of cabinets, however, would probably qualify.
Create a home office
If you want to know whether you can write off home repairs on your taxes or not, you’re probably pretty financially savvy. Maybe you’re the kind of person who runs a small business or a growing enterprise from the privacy of your home.
Good news! Any space in your home that is dedicated exclusively to running your business can be claimed as a home office on your tax deductions. Freelancers, entrepreneurs, take note.
The costs of improving just your home office may be 100 percent depreciated. If you’re improving, for example, the heating system for your entire house, and your office makes up 20 percent of your home, you can depreciate 20 percent of the costs of the upgrade. Plus, the benefits of having a home office can be deducted for years to come.
Rent a portion of your home
Improvements to the rental space can be appreciated against your tax bill. Like a home office, improvements that benefit the entire home are depreciated based on what percentage of your home is rented. Make sure Uncle Sam doesn’t freeload!
Upgrade your energy efficiency
Can you write off home repairs on your taxes for going green? You sure can.
Through 2016, qualified alternative energy generation systems like solar water heaters, small wind turbines and solar panels are eligible for a one-time tax credit of 30 percent of the cost. This includes labor and installation. Even after your one-time credit, you continue to get annual savings on your energy bills.
Upgrade to Energy Star appliances
If you upgrade to Energy Star-rated appliances, you reduce your carbon footprint and likely snag a tax deduction. Well played! You can see a complete list of eligible appliances at EnergyStar.gov.
Save on capital gains when it’s time to sell
Can you write off home repairs on your taxes? By now, you know you can. But get this: you can keep the taxman out of your pocket another way, too.
You’ve probably noticed that home improvements don’t directly lower your tax bill except in specific situations. Track every improvement anyway — when it comes time to sell your home, you may save yourself some money.
Let’s do some math:
You bought your home for $500,000. You lived there for several years, and during that time, you completed $100,000 worth of home improvements. You then sold your home for $850,000.
First of all, well done! You’re a regular land baron. Here’s the bad news: if you simply subtract the purchase price of your home from the sale price, you would have a $350,000 difference, and need to pay a capital gains tax.
But: If you tracked the $100,000 in home improvements that you made, the home repairs could be deducted from the difference in cost and sale. The IRS doesn’t require you to pay taxes on the first $250,000 of profit you make when you sell your primary home. Voila – you would be exempt from paying capital gains.