The money you spend on your home is treated different when it comes to income tax. When you make necessary repairs to your home to maintain its condition, these repairs are not tax deductible.
But any capital improvements you make to your home will increase the base price of the home and add equity. You will benefit when you sell the home.
Here’s your guideline. Any additions to the home or any improvements that have a useful life of more than a year could be considered as an increase to the base price of the home. Other notable base increases could include any special assessments you paid for sidewalks, paving streets or any amounts spent due to casualty loss and not covered by your insurance.
Improvements, unlike repairs, add to the base value of your home. They often prolong your home’s useful life and may even adapt your home to new uses.
However, don’t take just my word for it. Feel free to consult IRS Publication 523 starting at the bottom of page 8 for more information about improvements. Here are some examples of home improvements.
- Additions: Bedroom, bathroom, deck, garage, porch, patio.
- Lawn and Grounds: Landscaping, driveway, walkway, fence, retaining wall, sprinkler system, swimming pool.
- Miscellaneous: Storm windows, doors, new roof, central vacuum, wiring upgrades, satellite dish, security system.
- Heating & Air Conditioning: Heating system, central air conditioning, furnace, ductwork, central humidifier, filtration system.
- Plumbing: Septic system, water heater, soft water system, filtration system.
- Interior Improvements: Built-in appliances, kitchen modernization, flooring, wall-to-wall carpeting.
- Insulation: Attic, walls, floors, pipes and duct work.
You should also keep good records as proof of any improvements you made to your home. Often records of receipts for improvements, and additions that affect your home’s base value are enough. Make sure you have the date of the improvement and details, as necessary, on what was done. Homeowners with Fairfax homes for sale can add significant value to their home by using the list above and making improvements that will bring them a higher sales price.