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.)
More often than not, home improvements (even major ones) won't have an effect on your taxes once you sell. Nevertheless, it's not a bad idea to keep track of what you paid in home improvements over the years, in case you end up with a taxable gain after the sale. To qualify as a 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.
- Are home repairs or maintenance costs deductible?
- How do I handle capital improvements and depreciation for my rental?