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.