When you are contemplating doing some work on your property, you need to consider whether it will fall under the category of home repair or home improvement. This is a crucial distinction because home improvements are tax-deductible, whereas home repairs are not.
Home Improvement vs. Home Repair
What is Home Improvement?
So what constitutes home improvement? In its basic form, it is any enhancement that will add to the quality and therefore the value of your home. This would include putting up a new fence, installing a new driveway, a complete kitchen remodel, etc. They are projects that require capital expenditure, but add to the value of your property and increase the equity in your home.
What is Home Repair?
Home repair, on the other hand, is a task undertaken to prevent the decline or decay of your property and a subsequent drop in value. The improvement is necessary to maintain your home's existing standards, without making significant additions or enhancements. Home repairs include repainting or decorating, fixing leaks or breakages, repairing cabinets and replacing fixtures that no longer function.
Generally, expenditure on home repairs cannot be used to obtain a tax benefit. However, tax benefits exist for home improvement projects.
Know What Your Changes Mean for Your Home
Before you start work on your home, you should understand the various distinctions that allow or disallow tax deduction. You can then make an informed decision as to whether or not it would be financially prudent to expand your project beyond simple repairs to include home improvements.