When You Can Claim a Tax Deduction for Home Improvement

Many homeowners are shocked and dismayed to find that their large renovation projects do not qualify for home improvement tax deductions. The simple fact is, home improvement deductions apply only to a small percentage of projects, with very specific qualifications. If your project resulted in an energy efficiency improvement, then you might very well be entitled to a deduction. But a more reliable source of deductions comes from any work you do to convert your home into a place where you also conduct business. Here are some of the parameters.

• Square Footage Converted. If you decide to dedicate a portion of your home to your primary business, the first step is to find out exactly how much residential square footage you are giving up. The area of the office or work space is easy enough to calculate, but the deductible amount will be expressed as a percentage of the total square footage. Check your title or call your real estate agent if you need to know the total square footage of your home.

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• Exclusive Use. The business you conduct from home must be exclusively within the home office space if you want to claim any home business deductions, let along home improvement deductions. If the home office is your exclusive place of business, you may be able to claim any improvements you make to further the business along. If the home office is the primary business location, but you also use secondary, off site locations from time to time, check with your tax advisor to see if you still qualify for the deductions.

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• If You Are Not Self Employed. Some people work from home even if they are employed by someone else. In order to claim any home improvement deductions from renovations of this kind, you must show sufficient reason why working from home is more beneficial to your employer than having you work from the central office. Reasons for this can include telecommuting, medical needs, or specialized off site skills, just to name a few.

If you are planning a home renovation, home addition, or any kind of home improvement taxes and deductions are important things to research. Knowing in advance whether or not your project entitles you to any home improvement deductions can help keep things in perspective when tax time rolls around.