Everyone knows that there are tax benefits to be reaped from finishing the basement or adding a mother-in-law suite to a home, but there are other ways a home can help to gain financial ground when it comes to taxes.
When a person sells their home, they are required to pay taxes on the price of the property. Capital improvement costs earn tax credits that will lower the overall expense of those taxes at the time of sale. If a person (or couple) plans to own their home for a while before turning it over to someone else, then capital improvement expenses should be tracked and documented from day one of ownership.
With the proper documentation, the full cost of repairs, maintenance, and improvements to the home can be deducted from the total taxes charged when the house is sold. Check out this quick overview of a few home improvements that qualify as capital improvement expenses under tax law.
Upgrading the interior of a home can rack up those tax benefits like tiny morsels of candy. Always think environmentally friendly when updating anything in a home. Environmentally sound upgrades will qualify for tax deductions, while also qualifying as capital improvement expenses in the end.
Flooring, carpeting, built-in appliances, and modernizing kitchens and bathrooms all count towards increasing the capital gain of the home. Just make sure to keep all receipts filed away nicely for the necessary time.
Exterior upgrades such as new siding, new roofing, and even simple gutter upgrades can qualify as a boost. New window installation also qualifies as a capital improvement expense that can lower tax bills at the time of sale.
Home Systems Upgrades
Central heating and air conditioning, new ductwork, high-tech security systems, improved electrical wiring, and water/air filtration mechanisms all qualify as home systems upgrades. Document anything of this sort to the fullest extent and enjoy the knowledge that they will be profitable in the end. The Earth will be thankful, and so will the home’s occupants.
Improving and maintaining the land around a home is also a qualifier for capital improvement expenses. If ever a homeowner chooses to install an irrigation system for the lawn, an in-ground pool for the kids, a new driveway/walkway, fence, or retaining wall, it behooves them to know that these costs are eligible for tax credits.
Some Repairs Can Qualify
Though not all standard home repairs qualify as capital improvement expenses, there are a few situational repairs that do qualify. For example, while installing new windows into the home, workers discover the wood framing around the old windows is rotted and needs replacing. Due to the situation, the cost of repairing the wood would qualify.