When you make a home improvement, such as installing central air conditioning or replacing the roof, you can’t deduct the cost in the year you spend the money. But, if you keep track of those expenses, they may help you reduce your taxes in the year you sell your house.

Improvements versus repairs

Money you spend on your home breaks down into two categories, tax-wise: the cost of improvements versus the cost of repairs.

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Capital improvements

You add the cost of capital improvements to your tax basis in the house.

There’s no laundry list of what qualifies as a capital improvement, but you can be sure you’ll be able to add the cost of:

  • an addition to the house,
  • a swimming pool,
  • a new roof, or
  • a new central air-conditioning system.

Capital improvements are not restricted to big-ticket items, though. Other qualifying improvements include adding:

  • An extra water heater
  • Storm windows
  • An intercom system
  • A home security system

Certain energy-saving home improvements can also yield tax credits at the time you make them.

Home repairs

The cost of repairs, on the other hand, is not added to your basis. Examples of repairs rather than improvements include:

Source Google News