Improving or repairing your home? Know the difference.
New homeowners (and homeowners in general) often struggle with this dilemma:
Am I improving my home or repairing my home? This is a murky area often traversed yet tricky to
make you way through.
If you find yourself considering a big monetary output for your home, always be able to answer this one question: “What would the IRS say?”
As great as that giddy feeling of independence is when buying a home for the first time, the IRS
indirectly but very importantly has something to say about it. Especially when you want to start
personalizing your new digs to reflect the “real you.”
The IRS considers repairs to be a necessary evil in maintaining your home’s base value. Even if
you bought a foreclosure and had to make a lot of repairs for livability, the IRS does not care.
You got a discounted purchase price so, too bad.
If you replace the roof or add a new central air unit, these are usually considered improvements
and will definitely help when you sell your home and tax time rolls around.
Even certain remodeling projects can fall into an IRS gray area that can be hard to decipher.
Check IRS Publication 530 if you are concerned about what they think.
If you are considering a home improvement project, bounce it off someone who has no stake in
the results. They may help you discover that what you considered a necessary repair is actually
just something for your own enjoyment, especially if your finances say “let’s wait on that”.