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Everything You've Ever Wanted to Know About Tax Deductible Home Improvements

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Everything You've Ever Wanted to Know About Tax Deductible Home Improvements

"Your home should tell the story of who you are," says Nate Berkus, the designer Oprah made famous in surprise home renovations he did for guests on her show. Most of us want to make changes or improvements to our homes or apartments so that the space we live in makes us feel comfortable and happy. Sometimes we take on home improvement costs to make our homes more user-friendly or just to have the satisfaction of knowing your abode looks a bit nicer now. Whatever the reasons we make changes to our homes, an important question that almost always comes to mind is, "Are home renovation and improvements tax deductible?" The answer is yes, there are actually tax deductions for improvements, but maybe not in the ways we would expect. This is especially useful for paying taxes as an independent contractor or self-employed individual.
Image describing IRS deductions for home improvements including capital improvements, repairs, fixing design flaws, home office changes, and solar panel tax credit. No mention of self-employed, 1099, freelancer or taxes.

Table of contents

What home improvements are tax deductible?...Read more

Capital improvements...Read more

Can I write off home improvements after disasters...Read more

But are capital improvements tax deductible?...Read more

What's not considered an improvement?...Read more

Are home improvements tax deductible this year?...Read more

Making sure you catch every tax deduction...Read more

What home improvements are tax deductible?

Home improvement write-offs are just one of a handful of important itemized deductions available to taxpayers, but let's look at exactly what kinds of home improvements the IRS considers to be tax-deductible. It looks at all the kinds of changes you might make to your home and the different situations where you might have home improvement costs. For example, you might want to know, "Are home repairs tax deductible?" For each one, they have decided which category each update, improvement or repair falls into and whether it affects your self-employment taxes, so every homeowner is clear about every tax deduction for home improvement. Not all of the changes you make to your home are eligible as tax deductions for home improvements, but some improvements can also be considered home office tax deductions. For example, if you're an artist who also uses their home as a studio, you can claim the studio area as a deduction.

Capital improvements

Image showcasing examples of home improvements such as new furnace, wood floors, new roof, bathroom renovation, and new electrical system offered by eCapital Home Improvements. No mention of self-employment, 1099, freelancer, or taxes.
If you own a home, you're probably going to make capital improvements as you live in it over time, whether you do it intentionally or not. And, you want to know, can you write off home improvements? For example, if you add another bathroom in your house, that's obviously intentional, but if your water heater conks out, you don't really have a choice but to replace it. Both fall into the capital category and are considered by the IRS to be tax deductions for home improvements. The IRS considers things that give your property an upgrade that prolongs its useful life, like putting a new roof on, to be in the same category. According to them, it has to last for more than one year to be considered a capital improvement. Same with something that enhances the existing home, like solar panels, or adapts part of the home for new uses, like finishing your basement.

Can I write off home improvements after disasters

There seem to be more natural disasters happening in more places around the globe than ever before. If you live in an area prone to wildfires, tornadoes or floods, you'll want to take note of this: the IRS classifies anything you do to make your house the way it was before the disaster struck as a capital improvement. That makes every home improvement tax-deductible after a disaster. So everything you do to restore your place to its former beauty – even things not normally considered capital improvements, like repainting or fixing the gutters – is in this case, a capital improvement.

But are capital improvements tax deductible?

The answer is yes, but only when you go to sell the house. Changes like these add to the value of your home, and when you sell it to someone, that's when those improvements will affect your taxes. Here's how:
  • Most homes appreciate in value over time, so when you sell yours, you will likely make a profit
  • The profit is called a capital gain, and the IRS usually taxes capital gains
  • If you make capital improvements to your home, you can write off the cost of them from the capital gains tax you might have to pay
Will any of this matter to you? Maybe. Most people will never have to pay taxes on their profits when they sell their homes. This is because the IRS does not tax the first $250,000 of profit for people filing individually, or $500,000 for taxpayers filing jointly. But, if you've owned your home for a long time and made significant capital improvements over time, can you write off home improvements? A tax write-off could be a possibility for you when you sell your home. And there are other ways that home improvements can be a tax deduction for you in the current tax year. More on that later. If you own your own business or work as a freelancer, you can also access this complete guide to tax deductions. Taking advantage of these tax deductions can maximize your tax savings and help you keep most of your money in your pocket.

What's not considered an improvement?

Image with text listing home improvement projects that may be tax deductible according to the IRS, including adding a bathroom, finished basement, insulation, plumbing, paint job, and general repairs. No mention of self-employment, 1099, freelancer, or taxes.

Are home repairs tax deductible vs. are home improvements tax deductible?

Redecorating vs. correcting a design flaw

Are home improvements tax deductible this year?

Some tax-deductible home improvements can give you a tax benefit before you sell your home. In some situations, changes to your apartment can be eligible, too.

Solar panels

Improvements to your home office

Making sure you catch every tax deduction

When you're self-employed and working as a freelancer, an independent contractor or a gig worker, there are business expenses you might not even know are tax write-offs. Apart from claiming write-offs, you also have to remember to pay estimated taxes if your liability is over $1,000

Depreciation Tax Deduction

The depreciation tax deduction can be claimed for any asset that is used for business. There are three methods to calculate this deduction.

Education Expenses Tax Deductible

Education expenses are tax-deductible for self-employed individuals as long as they are related to their current job. Report the deductions on Schedule C.

Internet Bill Tax Deduction

For many who work from home, the internet is necessary for doing business. For some people, their internet bill counts as a tax write-off.

Write Off Your Car Payments

There are many tax deductions you can take related to your car, if you use it for work, but unfortunately your car loan payment isn't one of them.

Home Office Deduction

How the home office deduction saves self-employed individuals and freelancers on their taxes.

Travel Expense Deduction

If you travel for work as a freelancer, there are a number of travel expenses you can claim as tax deductions in 2023 – find the details here.

Food and Entertainment Deduction

For 2023, you can deduct 50% of the cost of business meals as tax deductible – but not every meal can be deducted. This is relevant to self-employed people.

Car depreciation tax

Here's how to take advantage of depreciation, one of the biggest tax deductions people who use their car for work can take.

Car tax write off

Many freelancers drive their own vehicle for business and may qualify for certain car and mileage tax deductions.

Moving expenses deduction

Until recently, you could deduct moving expenses on your tax return. Recent changes to the tax rules have impacted whether you can deduct moving expenses.

Simplified home office deduction

If you use space in your home as an office for your business, you can take either the actual home office deduction or the simplified home office deduction.

Rent Tax Deduction

If you're self-employed, there are few ways you can write off your rent, and if you know how to use them, they can be among the most important ways to save money on taxes each year.

Side Hustle Taxes

Self-employed individuals can write off business expenses when filing side hustle taxes. You can avoid paying taxes on side jobs if your net income is under $400 in a year.

Mileage Tax Deduction

Get a car mileage tax deduction using either the standard mileage deduction or actual expenses deduction. You will report this on Schedule C.

Cell Phone Tax Deduction

A cell phone tax deduction is available to self-employed individuals if it is used for their business. They can also write off their internet usage.

Business And Consultant Tax Deduction

Consultant tax write-offs are useful in lowering self-employment taxes. Sole proprietors can use a QBID to lower taxable income, as they are a pass-through business entity.

Is Credit Card Interest Tax Deductible?

Credit card interest is tax-deductible if it is from a business-related purchase. You can write off a portion of the interest even on a personal credit card if it comes from a business expense.

Are Office Expenses Deductible?

The home office tax deduction is used to write off your home office and office-related expenses. Claim it using the standard or simplified method.

Advertising And Marketing Expenses Deduction

Marketing tax deductions related to promoting a business can be claimed by self-employed individuals. Report them on Schedule C.

Business Startup Costs and Deductions

Business startup costs can be amortized over 15 years. You can also deduct up to $5,000 in the first year if total costs are below $50,000.

Vehicle Write Off For Business

Vehicles used for business can be a tax write-off in 2023. You can claim this deduction even if you lease your vehicle under the actual expenses method.

Are Subscriptions Tax Deductible?

Subscriptions are tax deductible for self-employed individuals. You can write off the business use percentage as a tax deduction on Schedule C.

Depreciation Tax Deduction

The depreciation tax deduction can be claimed for any asset that is used for business. There are three methods to calculate this deduction.

Education Expenses Tax Deductible

Education expenses are tax-deductible for self-employed individuals as long as they are related to their current job. Report the deductions on Schedule C.

Internet Bill Tax Deduction

For many who work from home, the internet is necessary for doing business. For some people, their internet bill counts as a tax write-off.

Write Off Your Car Payments

There are many tax deductions you can take related to your car, if you use it for work, but unfortunately your car loan payment isn't one of them.

What’s FlyFin?

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