As this year’s tax season draws to a close, many homeowners are beginning to plan their home-related tax strategies for 2024. To help, we want to share tips on maximizing your tax return through certain types of home improvements. While the specifics of your own tax filings should invariably be discussed with a qualified accountant, there are general guidelines regarding which home improvements are tax deductible.

Please note that you can only take advantage of the following home improvement tax deductions when you sell your home. Keep every record of the improvements you make to your home. This careful documentation will ensure that you are able to apply for every possible tax deduction.


Categories that Are Not Deductible

Repairs, routine maintenance, appliance upgrades, flooring changes, cosmetic fixture replacements, or any type of purely cosmetic home improvement will most likely not be eligible for a tax deduction. While these changes are beneficial and will almost always make your home more appealing to prospective buyers, they won’t earn you a break at tax time.


Tax Basis

Your home’s tax basis is the dollar amount of your original capital investment with the cost of substantial improvements added. The amount of allowable depreciation is subtracted along with casualty and theft losses.

This formula will help you predict how improvements you’ve planned will impact your tax basis from year to year.


Eligible Home Improvements

Any improvement that adds significant value to your home, improves its usable lifespan, or creates new uses within your home will most often be a permissible basis for a tax deduction.

A new array of storm windows, new HVAC system, home security system, fresh insulation, upgraded copper pipes, or a new roof are each common home improvement projects that would qualify under the aforementioned tax law requirements. 


Home Office Additions

Does a member of your household work primarily from home? If so, you can choose to extend your home’s structure by adding a dedicated home office. While the tax deduction you’ll earn will be comparatively small, this approach is a surefire way to receive a break for a home addition.

Once your home office is being used, even routine repairs will qualify for tax deductions—but only a percentage, which will correlate to the percentage of your property that is your office.


Rental Renovations

If you rent out a room or section of your home, you may be able to deduct improvements you make in that portion of your property. For example, should you install a kitchenette, bathroom, or laundry room in the rented portion of your home, your accountant may determine that you can write off these projects.


Handicap Accessibility and Other Medical Modifications

When a member of your family, whether it’s you, your child, or your aging parent, has a medical need that necessitates home modifications, these projects are eligible for a tax deduction. Make sure, however, that you obtain a physician’s recommendation in writing for the types of changes that must be made. This documentation will be required when you apply for tax deductions.

Wheelchair ramps, widened doorways, stairway lifts, accessible showers or bathtubs, and lowered countertops are all examples of modifications and upgrades you could make that would qualify for medically based tax deductions.

Please note that if such changes add value to your home, you will not be able to claim your expenses as deductions.


Green Energy Systems

Residential properties are eligible to earn tax credits for installing energy-efficiency upgrades. In 2021, updated guidelines were instated, under which the following were included: solar water heaters, solar electric systems, geothermal heat pumps, single-property wind turbines, and fuel cell properties.

Additionally, residential property credits for green energy cover the addition of metal or asphalt roofs, insulation updates, energy-efficient HVAC systems, skylights, and energy-efficient windows and doors.


The Takeaway

These are just a few ways your home can affect your eligibility for tax deductions. When you are planning upgrades to your property, keep these recommendations in mind. We also strongly recommend working with a qualified accountant or tax specialist before you make any upgrades or renovations.

While our information is accurate according to current tax guidelines, only a tax specialist will be able to assess your individual situation and determine whether or not you will receive any significant tax deductions based on your planned property updates.

Finally, you may decide that your upgrades or improvements are still worth executing irrespective of your ultimate eligibility for a tax break. Your quality of life and enjoyment of your home are likely far more important factors than whether or not you will score a kickback when you’re ready to sell.

While it’s a smart idea to lock down every tax break to which you’re entitled, our hope for you is that you experience the joy and freedom that only property ownership can bring.


Are you searching for a new home, or planning to sell your own? We are here to help. Contact one of our real estate agents today, and they will immediately get to work on your behalf. Our agents are your neighbors, and as locals themselves, they understand Middle Tennessee in a way no corporate real estate office ever could.

With us, you’re always in the best of hands.

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