When tax season rolls around, we’re often trying to find every way possible to ensure we’re getting the most out of our refund. The decision to remodel a part of your home is a big investment—but it can absolutely pay off in terms of tax credit. So then, can you claim your kitchen remodel on taxes? The answer’s a bit tricky: While you can’t benefit from a remodel the year it’s done, you can potentially benefit the year you sell your house.
If you make capital improvements on your home, you can add those to your tax basis—which is the amount you’ll subtract from the sales price to determine the amount of your profit. A capital improvement is something that adds value to your home, prolongs its life, or adapts it to new uses. While there are a variety of things that qualify as capital improvements, repairs you’ve done to your home will not be included. Repairs include things such as replacing a window or painting a room.
When you are ready to sell your house, the first $250,000 of profit on the sale is tax-free ($500,000 for married couples who file joint returns). To determine the size of your profit when you sell, you take everything you originally paid for the house, and add to that the cost of all the improvements you have made over the years to get what is known as the “adjusted basis.” When you compare this total to the sales price of your house, that gain may be taxable if you’ve made a profit. But if you’ve come in at a loss, it is not tax deductible. That being said, it makes sense to keep track of what you spend over the years to improve your home in order to avoid paying taxes or a reduced profit when you sell.
Planning a Remodel for Home Improvement
If you decide that updating your home will be worth it in the long run, it’s beneficial to decide what rooms or projects will bring the most value. Many homebuyers are looking for fresh, updated kitchens and bathrooms. These can also be the most strenuous or difficult to update.
Here are a few quick tips for a smoother remodel:
Stick to your budget
One of the most important things when planning to remodel part of your home is to create a budget and stick to it. There are plenty of unforeseen costs that could arise throughout a remodel that could potentially set you back in terms of finances or design. Make sure that you know exactly what you need for your remodel, and then focus on the things that you want. For example, there might be higher-end fixtures you love but are out of your price range. In a situation like this, you could scale back or try to find a company that sells similar ones at a cheaper price.
Create a remodelling plan and try to follow it. This will ensure that your timeline flows smoothly. After you’ve set your budget, you’ll want to find a proper contractor and lock down design ideas or consultations. You’ll also want to determine how many weeks you want to spend on the remodel, what you’ll do without a kitchen or bathroom during the process, and more. There are so many details when it comes to remodeling part of your home that you don’t want to overlook.
Hire the right contractor
This is one of the most important things to do when it comes to remodeling. You want to find a qualified contractor that fits your style, budget, and timeline as closely as possible—but also delivers high-quality service and work. Do your research on contractors in your area, and ask around to family and friends for recommendations.
Remember the big picture
No matter what you do, there’s bound to be some stressful situations throughout the remodel that make you question the whole project. When these come about, you have to keep your eyes set on the big picture. Your living situation is only temporary and soon you’ll have the kitchen of your dreams—or down the road when you sell your home, you’ll be able to get the best value possible.
Remodel Your Kitchen with Honey-Doers
Whether or not you’re able to claim your kitchen remodel on your taxes—if you’re ready to make the investment, finding the right contractor is key. The licensed contractors at Honey-Doers specialize in providing high-quality residential remodeling, renovation, repair, maintenance, assembly, and installation services. With over 20 years of experience, Honey-Doers is equipped with the knowledge, tools, and resources to transform your idea into a beautiful residential remodel or home project. Contact us today for a free estimate!