Home Improvements That Can Be Tax-Deductible | Billy.com

A tax write-off is a legitimate expense you can deduct from your federal income tax return. Read below to learn about home improvements that can be tax-deductible.

1. Improvements That Increase Property Value

Large-scale enhancements, such as updating the insulation in your attic, can improve the value of your home, but some smaller-scale changes can also make a big difference. For example, a water filtration system can be tax-deductible and is a fairly small-scale renovation that doesn’t take much effort to complete.

Document capital improvements as you make them to get the best deduction. Some upgrades are only deductible the year you sell your home, and documentation helps you keep track of the changes you’ve made over time.

2. Home Office Improvements

Home office improvements can also be tax-deductible. If you're self-employed or own your own business, home office renovations can be tax-deductible.

In order for such renovations to be tax-deductible, you must use the home office regularly and exclusively for work. This stipulation means that if your office doubles as a playroom, it's likely ineligible for a deduction. Your home must be your principal place of business.

3. Energy-Efficient Changes

While not the same as a tax deduction, a tax credit can be applied to some energy-efficient renovations. A deduction reduces your taxable income, but a credit reduces the tax you owe. Tax credits are typically more valuable than deductions.

Some solar roofing tiles and solar roofing shingles can be eligible for a residential energy-efficient property tax credit. Roofing materials and structural components that only serve a structural function but do not improve efficiency do not qualify for this credit.

Capital improvements that increase the property's value, home office improvements, and energy-efficient renovations can help you save on taxes. Before you settle on a project to improve your primary residence or rental property, find out if it qualifies for a tax deduction or credit. Tax laws change frequently, so make sure to always look at the most current information or speak to a professional tax preparer.