How to Deduct Home Improvements
Home improvement expenses are not deductible on your tax return in the year they are incurred. They are considered capital expenditures and are added to the basis of your home (the price you paid for it plus closing costs and legal fees). When you sell your home, the increased basis decreases your capital gain and your tax liability. There are, however, some expenses related to home improvements that you may deduct. Things You'll Need Receipts IRS Schedules C, E and D Show More Instructions Deduct Home Improvements Keep good records. Make a folder and save all of your receipts and records for any improvements you make to your home. If you're audited, the IRS will want to see them. The cost of labor also counts toward your cost basis, so save your canceled checks. Deduct interest paid on funds borrowed for the construction of a major improvement to your home. Interest for debt incurred up to 2 years before the completion of a major home improvement project or up t