For the purpose of tax benefits, a home improvement should include any kind of work that would significantly add to the value of your house, boosts its useful life, and adapts it to its new purposes.
In case you use your house as your personal residence, you won’t be able to deduct the cost of the home improvements. These costs are personal expenses that are non deductible.
But, this does not imply that home improvements don’t have a tax benefit. They could help lessen the amount of taxes that you need to pay once you sell your home at a profit. This is due to the fact that the cost of your home improvement are added to your home’s tax basis. It means how much you’ve invested in your house for tax purposes. If you have a greater basis then you will receive less profit once you sell your house.
The most common way for homeowners to increase their basis is to have home improvements. But, the basis of your home does not include improvement costs that are removed from the house at a later time. For instance, if you have installed a brand new chain link fence 15 years ago and have it changed with a redwood fence, how much the old fence costs is no longer a part of the basis of your home.
Even though you cannot deduct home improvements, it is still possible for them to depreciate. It means that you have to deduct the cost over the past years and that is between three to about 27.5 years. To qualify to depreciate the cost of your home improvement, you should use a part of your home other than as a personal residence.
Qualifying For The Home Office Deduction
One good way to depreciate home improvement costs is to come up with a business and use a part of the house as an office for your business. To be eligible for the home office deduction you should have a business that is legitimate and you must use a portion of your home to regularly and exclusively for the business.
In case you qualify for this particular deduction, you could deduct 100% of the home improvement costs you make just to your home office. Home improvements that benefit your whole house are depreciable based on the home office percentage.
Rent Out Part Of Your House
Another method of depreciating your home improvement Myrtle Beach costs is to rent out a part of your house. This lets you to depreciate the expense as the rental expense. The cost will then be deducted from the rental income that you get.
As with the deduction for the home office, home remodel that benefit just the portion of the house being rented could be depreciated in full. Improvements that benefit the whole house could be depreciated based on the percentage of the home’s rental use.
Learn more about home improvements by calling Keystone General Contracting.
Keystone General Contracting
Myrtle Beach, SC