Tax Advantages of Capital Improvements

Tax rules allow you to add capital improvement expenses to the cost of your home, which may help minimize your tax liability down the road. A rule of thumb – a capital improvement increases your home’s value (e.g. a finished basement) and may be eligible, while a repair is simply returning something to its original condition (e.g. painting) and is not eligible.

While there is a capital gains exemption available to sellers, by keeping track of your capital improvements it may help offset any tax liability you would have beyond the exemption or in case you do not meet residency requirements for the exemption.

As always, if you are considering any capital improvements it may be wise to talk with your accountant to find out if the improvement can qualify, how it will be calculated and what records you should keep for future reference.

The National Association of REALTORS recently launched a new website, HouseLogic, that contains articles on many relevant topics for home sellers, buyers and owners. You can read more about Tax Breaks on Capital Improvements on their site.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: