Did you know that your home improvement project can provide tax benefits later on? While home renovations are not necessarily tax-deductible, you can take advantage of the money you put into the remodel.
Home improvement includes improvements made to the bedrooms, bathrooms, hallways, walkways, driveways, fences, attic, basement, or anything else that can add substantial new value to your home. While you’re not able to deduct improvements for your personal residence, owning a home office or studio can offer eligibility for a certain amount of square feet as a write-off on your taxes.
But what if you own a property that is solely residential?
You can still reap the benefits from even a residential property. In remodeling your home, you are increasing the value of the home and can use that in your favor when choosing to sell your home later on. When it comes to taxation, there are strict rules on what can be factored into taxes. You are permitted to add any renovation costs to the value of the home in order to reduce owed taxes upon the sale of the home. For example, if a house is bought for $300,000 and sold at $500,000, then there is $200,000 in profit taxes to pay on the home. However, if $50,000 is spent upgrading the home while it was owned, the house can be valued at $350,000 and sold at $500,000, meaning there will be only $150,000 of taxable revenue. While this isn’t technically a “tax-deduction”, it’s a great way to save yourself a little money in the long run!
Before making your home renovation decisions, think about what types of returns you can get from improving your home! Invest in your home now and reap the benefits when you sell later down the line. You’ll be happy you did. Check out our Kitchen Gallery and Bathroom Gallery to take a look at some of our recent updates!