Fixing up a house is a constant process. If there isn't something that needs repairing, there's probably something that needs improving — whether it's installing built-in shelves, remodeling your kitchen or adding on a bedroom. If the property is your personal home, you don't have many options for writing off repairs and improvements. You can deduct more expenses if you rent out the house.
If you're renting out a house you own, you deduct the cost of any repairs you make — plumbing, electricity or replacing a dead air conditioner, for instance — from your rental income. A repair is anything that keeps your property in good working condition but doesn't materially add to the value. If you do the job yourself, you can write off the cost of the materials you use. If you hire someone else, write off their bill. If the repairs are on your personal residence, there will be no deduction.
Improvements are projects such as a new wing or a kitchen remodel that add to the value of your property. If you improve rental property you can only write off the cost through depreciation, taking off a percentage of the improvement's value each year to reflect its age. You can't deduct improvements to your personal home, but they will lower your taxable profits when you sell. If you buy your house for $180,000 and sell for $220,000, your taxable gain is $40,000; if you made $15,000 in improvements, the gain is only $25,000.
If you make improvements to your house for you or your family's medical needs — grab bars, a wheelchair ramp, easy-open door handles — they may be a deductible medical expense. Calculate the value your improvement adds to the house and subtract that from the money you spent on the project: The leftover expense is deductible, but only if you itemize. Add up your total medical expenses, subtract 7.5 percent of your adjusted gross income — figured on the front of your 1040 — and whatever is left is your deductible medical expense.
Making your personal or vacation home more energy efficient can earn you a tax credit. If you install a geothermal heat pump, wind turbine, residential fuel cell or solar-energy system, you can take 30 percent of the cost right off your taxes, rather than off your taxable income. The system has to meet the government's EnergyStar standards and conform to other restrictions. A solar system that only heats your swimming pool and not your house wouldn't count, for instance. The credit is available through the end of 2016.
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