No, that is a home improvement. Home improvements and repairs are not deductible on your personal income tax return. However, you may be able to deduct/depreciate home improvements for your rental or business.
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, but you can be sure you'll be able to add the cost of an addition to the house, a swimming pool, a new roof or a new central air-conditioning system. It's not restricted to big-ticket items, though. Adding an extra water heater counts, as does adding storm windows, an intercom, or a home security system. (Certain energy-saving home improvements can also yield tax credits at the time you make them.)
The cost of repairs, on the other hand, is not added to your basis. Fixing a gutter, painting a room or replacing a window pane are examples of repairs rather than improvements.
Home improvements may come into play when you sell your home because they're included in your home's adjusted cost basis. The bigger your basis, the smaller your capital gain, and that means less tax if your home sale profit exceeds $250,000 ($500,000 if you're filing jointly). Read more about the tax implications of home sales.
To qualify as a tax deduction, the home improvement must:
- Add materially to the value of your home; or
- Prolong your home's useful life significantly; or
- Adapt your home to new uses.
For most people, home improvements – even major ones – won't help their taxes after the home is sold. Nevertheless, it's always a good idea to keep track of what you paid in home improvements over the years, not just for potential tax savings but also to help justify your selling price.
