Understanding Home Improvement Deductions

Generally home improvement deductions will occur when you sell your home, based on the home improvement taxes rules and regulations. First you have to understand the difference between repairs and renovations to determine what might be eligible for tax deductions as you sell.

Repairs are those activities and projects that occur as part of normal wear and tear. For example, fixing a broken window or repainting a room would fall under the heading of repairs. They are not contributing as a capital improvement, even if they help with the overall appearance of your home.

Renovations are the types of projects and expenses that would provide home improvement tax deductions when you decided to sell. Those are projects such as adding on a room, adding a new central air conditioning unit or putting in a swimming pool. They are considered to add value to your home or to extend the uses of your home.

You should note that your home improvement deductions coming from renovations that extend the life of your home cannot be used in the year that you paid for them. They are considered to be capital improvements that have to be amortized over the course of years through depreciation. The IRS sets specific rules and guidelines around how much you can claim through depreciation each year. They realized that any kind of improvement is subject to deterioration over the course of many years and your willingness to invest despite that is rewarded through extended home improvement deductions.

You can figure out the expected life of your capital improvement through the tax schedules. They make estimates based on reasonable use that extends for 27 years. That means, using your schedules, you might be eligible for a deduction over those years that you own the property.