Owning a home can provide you with a significant break on your tax return. In addition to writing off your mortgage interest and property taxes, you may also get a deduction for certain improvements. To take advantage of this, the IRS stipulates that the work done must add considerable value to the house or adapt it for new uses. As such, you’ll have to carefully assess each project to ensure it falls within these guidelines. Below is an overview of how to make a successful claim.

What Kind of Upgrades Are Deductible? 

To determine if a project is deductible, you must understand the difference between an improvement and a repair. For tax purposes, a repair is anything that restores a home back to its original value and keeps it operating efficiently. Repairs can’t be deducted from your tax return.

Improvements that will reduce your tax liability are those related to a home office operation or renovations made for medical care (as long as they don’t increase the value of your home), such as adding a ramp or widening hallways. Energy-efficient upgrades, like solar panel installation, are also eligible. 

How to Properly Claim Them on Your Tax Return

The majority of home improvements are only tax deductible when it comes time to sell the house. Thus, it’s important to keep meticulous records of all the work that’s performed on your property. These efforts will decrease your property gain and reduce the amount of taxes you may owe on the sale. However, improvements made for medical care can be claimed on your tax return in the medical expenses section, and home office upgrades can usually be deducted on Schedule C through depreciation expense. 

If you’re planning to make any home improvements or have recently completed a project, the skilled tax preparers at PMC Tax Service can help you get all the deductions you’re entitled to. For 30 years, they’ve provided residents in and around Lincoln, NE, with reliable tax return preparation. They stay up to date on the latest tax codes and can advise you of different strategies to minimize your IRS obligations as much as possible. Call (402) 467-5529 to set up an appointment, or visit them online to learn more about their services.