Can I deduct home improvements on my tax return?
For your personal residence, the answer is usually no, although you may benefit from certain energy-related home improvements.
Home improvement costs only come into play when you sell your home because you can include them in your home's adjusted cost basis. The bigger the basis, the lower your capital gain. (By the way, you can exclude up to $250,000 of the gain from the sale of your main home; $500,000 if you're filing jointly.)
Home improvements, even major ones, usually don't have an effect on taxes unless the home's value has increased substantially since its purchase. Nevertheless, it's not a bad idea to keep track of what you paid in home improvements so you can possibly lower your capital gains in the event you sell your home for much more than what you paid. Your 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.
- Are home repairs or maintenance costs deductible?
- How do I handle capital improvements and depreciation for my rental?