Can I Deduct the Contractor's Wages for Work Done on My Home?

Generally any home improvement you had made by a contractor will not be deductible. The Internal Revenue Service considers home improvements to add value to your house, so you can't deduct the costs immediately. You can add that value to the cost basis of your house and claim some capital gain tax benefit when you sell it.

You will get some tax benefit if you paid the contractor with a home-improvement loan or home-equity loan or line of credit. The interest on those loans is deductible if they are used for improvements such as finishing a basement, enclosing a porch or adding a room. They aren't deductible if they are repairs such as replacing a broken window or damaged shingles.

If medical reasons required the work, you probably can claim a deduction. Installing ramps or handrails, widening or modifying doors and halls, lowering cabinets and other changes to accommodate a spouse or other family member who is disabled can be included as medical expenses. You can deduct all the amounts over 7.5 percent of your income, including work on the house, medical insurance and doctor bills. You'll need a doctor's statement explaining the need for the changes.

Building or expanding a home office can get you some tax benefit if you can prove the change was only for your office and not a general home improvement. You'll have to work this out on IRS Form 8829, which lists expenses for business use of your home. If the work involved remodeling a couple of rooms to expand your office, you'll be limited to claiming only part of it, based on the space used for your office.