Home repairs can be expensive, and it'd be nice if you could defray some of the cost by writing them off on your taxes. Unfortunately, the Internal Revenue Service generally looks at your home as a place where you live rather than purely as an investment, and it doesn't let you write off repairs on it. However, you might be able to get around this general principle and still get some tax benefit.
Repairs vs. Improvements
If you're writing a check to a handyman for improvements made to your house, the IRS will let you add it on to what you paid for your house -- increasing your cost basis -- so that you may pay less capital gains tax when you sell. The line between repairs and improvements can be murky, but the rule of thumb is that a repair makes your house the same as it was before something broke, while an improvement either extends the life of the home or involves an addition that increases the home's value. Replacing a broken window is a repair, but replacing every window with energy-efficient ones is an improvement.
Energy Efficient Repairs
When your handyman does a project on your house, ask him if he can install energy-efficient replacements for what he removes. For the 2013 tax year, the government offers tax credits when you install high-efficiency heating and air conditioning units, windows, doors, insulation and other building systems. You won't be able to deduct everything, but you will get some of what you pay back in the form of a tax credit that you can use to reduce the tax you owe.
If you have an office in your home, you can write it off as a business expense. The IRS effectively treats it as a small office building nestled inside your house. You can write off anything that you have done specifically to your home office and you can write off a proportional share of other expenses for your home that also benefit the home office. This means that if your handyman does work to your house in general, the pro-rata share of that bill will be deductible as a part of your home office expenses. For example, if your home office is 14 percent of your home and you pay a handyman $250 to fix a squeaky garage door, $35 of that bill is deductible.
Rental homes are investment properties and get treated differently. Generally, the IRS only taxes you on the profit after subtracting expenses, rather than on the gross rental income. After subtracting your expenses from your gross rental income, you pay tax on what is left. The IRS will let you write off everything you pay the handyman.
If your handyman makes improvements instead of repairs, you'll have to spread your write-off for the improvement over a period of several years through a process known as depreciation. You can write off the entire cost of repairs in the year that it the work is done.
- RealEstate.com: Can I use Home Improvements as a Tax Deduction?
- Energystar.gov: Federal Tax Credits for Consumer Energy Efficiency
- IRS: Schedule E (Form 1040)
- IRS: Publication 530 - Tax Information for Homeowners
- Nolo: Repairs vs. Improvements: Complicated New Rules Go Into Effect in 2014
- IRS: Home Office Deduction
- IRS: Form 8829 - Expenses for Business Use of Your Home
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.