Sooner or later, as an owner, you’ll have to make some home improvement or maintenance-based renovations to your condo. When you’re thinking about the associated expenses, you should take into account certain tax deductions that can help you recoup some of the costs of the renovations.
There are two main ways in which home improvements can lower your taxes:
Energy-efficiency related home improvements, if they qualify, can give you an immediate tax credit the next time you file your taxes. As you probably know, a tax credits is even better than a tax deduction, because it offers a dollar-for-dollar reduction in your tax bill. Examples of items that can qualify are energy-efficient appliances, or new windows and doors that improve energy efficiency in your condo. Always be sure to check with the vendor or contractor whether your purchases do in fact qualify for the tax credit, and if the Tanswer is no, ask about alternatives that do qualify.
The second way to receive tax benefits from condo improvements can take some time—improvements increase your cost basis in the condo, lowering the capital gains tax burden on your profits when you sell it. Be sure to keep good records of your renovation projects, so you can prove the expenses to the IRS if you ever need to. Also, keep in mind that if your condo is your primary residence and you’ve lived there for at least 2 years, you don’t have to pay taxes on the first $250,000 in capital gains ($500,000 if married, filing jointly) anyway.
In general, the tax advantages of home improvements are not high enough to offset the costs. For the improvements to be a good idea, they should have other benefits—lowering your ongoing energy costs, making your condo easier to sell or rent, or increasing your condo’s aesthetic value.
