Renovating new home

Forum|Forum|4 years ago
January 26, 2022
1 reply
0 views

We sold our home and bought a new home that needed renovation. What can I claim deductions on and how? I hired a contractor for a lot of it.. so do I use the bills from the contractor? What can and cannot be claimed as a deduction? We used cash from the sale of our previous home, so there were no loans to used for construction. Thank you

LeonardS

Level 14

If your new home is your primary home the portion of your renovations that are capital improvements will be added to the basis of the home. Renovations that are not capital improvements are considered normal repairs and maintenance and can not be deducted.

In general, a repair is something that you would do to maintain the home at a basic level.

A capital improvement is something that actually adds to the value of the home or increases its usefulness. Some examples of capital improvements are:

Remodels and room additions (including decks and porches)
New or upgraded landscaping, irrigation, sprinkler system
Hardscape such as pavement, block or retaining wall, patio
Fencing
Swimming pool, spa
Storm windows, doors
New roof
Central vacuum or security system
Upgraded wiring, plumbing, ductwork
Central heating, AC, humidifier
New furnace, water heater
Filtration, soft-water, or septic system
Built-in appliances
New flooring or wall-to-wall carpeting
Upgraded insulation
Satellite dish

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

01tarasheaAuthor

Level 2

Thank you. Yes, I believe we are talking about capital improvements. So when I do my taxes, is there a section for this? And is this a tax deduction?

We have added a bedroom, added a bathroom, upgraded the flooring, added ac/heat in new area. Upgraded wiring, added ridge vents to roof, etc.

Therefore do I use the bills from the contractor to substantiate? Will everything need to be itemized? If so, I will need to get better receipts from the contractor.. as he has things written in lump sums.

DianeW777

Level 15

No. Capital improvements are added to the cost basis of the home but are not deductible. This increases the cost of the home which will be needed at a time in the future when the home is sold. Keep an ongoing record of any and all capital improvement as long as you own your home and until it is sold.

The deductions allowed on your tax return will be mortgage interest and real estate taxes for itemized deductions for your personal home.

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"