Home improvements to your personal residence is not deductible. You should add these improvements to the basis of the property which could reduce the gain if sold.
You add the cost of capital improvements to your tax basis in the house.
- Your tax basis is the amount you'll subtract from the sales price to determine the amount of your profit.
- A capital improvement is something that adds value to your home, prolongs its life or adapts it to new uses.
There's no laundry list of what qualifies as a capital improvement, but you can be sure you'll be able to add the cost of:
- An addition to the house
- Swimming pool
- New roof
- New central air-conditioning system
Capital improvements are not restricted to big-ticket items, though. Other qualifying improvements include adding:
- An extra water heater
- Storm windows
- An intercom system
- A home security system
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