Considering the price of home improvement projects, any homeowner who is considering a home renovation must check out if his or her project will qualify for home improvement tax deductions. Thus, homeowners must never begin a project without first finding out if a project qualifies to receive tax benefits of home improvement. However, when it comes to qualifying for home improvement tax deductions, there is a fine line between qualifying and not qualifying. While it can be confusing to determine if a project qualifies for a home improvement tax deduction, it basically comes down to the difference between making an actual home improvement, or funding a project that is routine maintenance.
To the good old IRS, there is a difference between a repair and an improvement. While many people use the terms interchangeably, and view the differences as a matter of minor semantics, the IRS, naturally, does not. Generally, a home improvement is something that adds value to a home, such as an addition, a garage, or a fireplace. A repair does not add value to a home, although it could certainly be considered an improvement. An example of a home repair that is often confused with a home improvement is replacing a roof. While rebuilding a roof may look nicer and add considerably more strength to a home, roof replacement is considered regular maintenance, which is recommended every twenty years. As such, building a garage will qualify for home improvement tax deductions, but roof replacement will not.
However, there are certain home repairs that could be considered home improvements, but to qualify, a homeowner must be generating income from the property. Thus, repairs performed on rental properties or on a property that is part of a home business both qualify for home improvement taxes, because the property owner makes money off of them. A further example would be an home salon or spa, where the business is home based. Thus, repairs to the property add value to the business.
Even if a project appears as if it would qualify for home improvement taxes, it is always a good idea to check with an expert first, before beginning a home improvement project. As such, a real estate attorney, tax accountant, or banker can offer the best advice on home improvement taxes. Thus, it is in the best interest of a homeowner to contact an expert before the planning process begins.