When Do Home Improvements Equal Tax Deductions?

Home improvement deductions are gaining in popularity as the housing market starts to come back and people renew their efforts to sell homes. Unfortunately, for most people this is not the kind of home improvement deduction that they were thinking of. When filing a tax return there are only a few things which qualify for home improvement tax deduction and they are mainly centered around energy efficiency. To truly benefit from a tax deduction related to home improvement there are certain criteria that must be met.

1. The improvement or renovation must be significant.

A new bathroom, kitchen, deck, garage, roof, water heater, or pool, these are all significant, or major improvements. They add value to the home. Replacing a light fixture, minor repairs, new appliances, these are not considered by the IRS to be purchases that add to the value of your home.

2. You must sell the home.

There is a complicated piece of tax law called tax basis, and this is the reasoning behind a tax break being allowed when you sell your home after making major improvements. If you have lived in your property for three to five years at the very least before you sell your home, then you may receive a tax break.

Thankfully there are no specific home improvement taxes to worry about, so if you are considering selling your house one day then it may be beneficial to make improvements. Just remember that the IRS makes strict distinction between repairs and home improvements or renovations.

Understanding taxes and home improvement deductions can be incredibly difficult even when you try to go directly to the source. Unfortunately, tax law is not something that should only be somewhat understood, especially when the primary source of your understanding is taken from the internet and online articles. Therefore, it is highly recommended that you always seek professional help when looking to claim a new tax deduction or achieve a tax break.