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Fixing up your personal home or a rental property can be a time-consuming and expensive process. However, you can deduct the cost of some home improvement and repair projects on your tax return. These deductions reduce your taxable income and decrease how much you owe the Internal Revenue Service.
You cannot deduct expenses associated with repairing your primary residence. However, if you own rental property, repairs are tax deductible. Repairs maintain the condition of your rental property, and you can write them off as a business expense. Eligible repairs include painting the walls, fixing a hole in the wall, replacing broken light switches or fixing a broken toilet. You can deduct the cost of these repairs from your total rental income in the year that you paid for the repair.
If a member of your household is disabled or has difficulty maintaining his balance, any home improvement for medical purpose is tax deductible. This includes the installation of wheelchair ramps, elevators and bathroom safety rails. You can deduct these costs as a medical expense.
You can deduct home improvements, such as new windows, a room addition, a new roof and other projects that increase your home's value. However, the rules vary depending on whether the property is your primary residence or a rental property. With your primary residence, you can deduct the cost of home improvements only after you sell the house. For this reason, it is important to keep receipts for projects you've completed over the years. You need these receipts to claim your deduction. If you own rental property, you cannot fully deduct home improvement expenses in the year that projects were completed. Renting out properties is a business, thus the rules for recovering these home improvement costs differ. As a business expense, you deduct the depreciated value of the improvement over the expected life of the property.
Home Improvement Loan
If you take out a home improvement loan or use money from a home equity loan to make home improvements, the interest you pay is tax deductible. To qualify for a deduction, the improvement must boost your property's value. You cannot deduct the interest if you take out a loan for repairs on your primary residence. Repairs, such as painting the walls or fixing faulty items, do not increase your home's value.