Being a homeowner has its benefits, one of which is allowing you to claim various home-related costs. However, in many cases, you can't deduct the costs of conducting home repairs, even they are necessary. In certain conditions, you may be able to deduct home repair costs from your taxes.
General Repairs
For tax purposes, you have to differentiate between repairs and improvements. Repairs keep your home in good conditions, but they don't increase your home value. Home improvements add to the value of your home. You can deduct the costs of home improvements, but you can't deduct the costs of general repairs, regardless of how necessary or significant the repairs are. If you deduct these repair costs, the Internal Revenue Service (IRS) may contact you and demand payment for the unauthorized deductions, penalties and interest.
Loan Interest
If you take out a home equity loan to pay for your home repair costs, you can deduct the interest you pay on the loan from your taxes. The loan limit for such a deduction is the higher of $100,000 or the amount of home equity you have. In this context, home equity refers to the current value of your home, minus any debts you have against it. If you are married filing separately, the $100,000 limit drops to $50,000.
Part of Selling Costs
If you carry out the repair within 90 days of selling your home, you can claim it as part of your selling costs. For example, you can claim the costs of painting the walls of your home to make it more appealing to prospective buyers. You can't claim these costs against your taxable income. These selling costs reduce the amount of your taxable capital gain from the house sale. The taxable capital gain refers to your selling price, minus various costs, such as original purchase price, home improvements and selling costs.
Special Uses
You can deduct the costs of home repair you carry out in the part of the home you use for business. For example, if you use a room in your home as a home office or as a rental space, then you can claim all the costs related to the space against your business incomes. If you carry out repair for the entire house, allocate the costs related to the business space based on the size of the space.
Casualty
If you have to repair your home because of a casualty loss, then you may be able to deduct the costs from your taxes. For example, if a "federally declared disaster" occurs and it affects your home, then you can claim the costs of repairing the damages caused by it, according to the financial website Daily Finance. Other events that allow you to deduct repair costs include unexpected floods, fires or earthquakes.
Tags: your home, deduct costs, claim costs, from your, from your taxes, home equity, home repair
