Are Home Repairs Tax Deductible?

Home repairs are not deductible but home improvements are. It pays to know the difference.

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If you use your home purely as your personal residence, you obtain no tax benefits from repairs. You cannot deduct any part of the cost. However, home improvements are treated differently. They can provide tax benefits.

Obviously, it's important to understand the difference between a home repair and a home improvement. For tax purposes, a home repair is an activity that keeps your home in good condition, but does not make it substantially better than it was before. Examples of repairs include patching a leaky roof, repainting your home, fixing gutters or floors, fixing leaks, plastering, and replacing broken windows.

A home improvement makes property substantially more valuable and/or long-lived or useful than it was before the improvement. Thus, costs to restore your home to a like-new condition are improvements. Examples of improvements include installing a new roof on your home, adding a deck, installing a new heating system, or installing a new foundation.

As far as taxes are concerned, repairs to a personal residence are meaningless. The only way you can deduct all or part of the cost of home repairs for your residence is if you qualify for the home office deduction or rent out part of the home.

If You Qualify for the Home Office Deduction

You can deduct all or part of home repair costs if you have a business and use a portion of the home as an office for the business. To qualify for the home office deduction you must have a legitimate business and use part of your home exclusively and regularly for the business.

If you qualify for this deduction, you can deduct 100% of the cost of repairs you make just to your home office. For example, if you use a bedroom in your home as a home office and pay to replace broken window with a similar window you may deduct the entire cost.

Repairs that benefit your entire home are deductible according to the percentage of home office use. For example, if you use 20% of your home as an office, you may deduct 20% of the cost to repair your home heating and air conditioning system.

You Rent Out Part of Your Home

Another way to deduct home repair costs is to rent out a portion of your home. This enables you to deduct all or part of the expense as a rental expense. This amount is deducted from the rental income you receive.

As with the home office deduction, improvements that repair only the portion of the home being rented can be deducted in full. Repairs that benefit the entire home can be deducted according to the percentage of rental use of the home.

March 2013

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