Is Kitchen Remodeling Tax Deductible?

Can a Kitchen Remodel Count for a Tax Deduction?

The short answer is that a kitchen remodel is potentially a tax-deductible expense in some situations. Yes, that means that brilliant cabinet refinishing, a plan to upgrade cabinets and other house renovation plans can actually help you to owe less in taxes for the year.

It all comes down to knowing how to use a tax deduction for a kitchen remodel.

Generally, the tax code dictates that home improvements for any home that serves as your primary residence are not considered tax-deductible expenditures. However, there is the potential to earn tax credits that are separate from tax deductions if you make energy-efficient upgrades to your home when updating your kitchen.

This can include everything from new appliances to a better heating system.

Real Estate Situations Where a Remodel May Be Tax Deductible

Can You Write Off Home Improvement Expenses on Your Taxes?

Only if the upgrade qualifies as what the IRS refers to as a capital improvement that is being made for the purpose of increasing home's cost basis when selling it.

A capital improvement is a permanent alteration to a structure that increases overall value by increasing sustainability.

Is a Kitchen Renovation a Capital Improvement?

Yes, kitchen upgrades are generally considered to be capital improvements under the IRS's guidelines. In fact, new kitchens, new kitchen appliances and new flooring can all qualify.

What's more, adding an actual addition that includes a kitchen still places you in the right territory for deducting the cost as a capital improvement.

Another situation where a kitchen remodel may be a tax-deductible expense is a rental situation. It's possible to deduct the cost of a kitchen remodel from the rental income if you rent out a property. However, the deduction will only be applied in proportion to how much of the house is being used for rental income.

How Do Home Improvements Help You Save on Taxes?

Homeowners are eligible to exclude up to $250,000 (single) and $500,000 (married filing jointly) of profit gain from taxes.

Gain on a home sale is tallied using something called a basis that reflects a homeowner's total financial investment in a property up through the date of sale. Yes, this includes any improvements or remodels done throughout the years of owning the home.

The lesson here is that it's important to keep receipts, records, and documentation any time you pay for a home improvement because those expenses could help you to pay smaller taxes on the amount you make from selling.

How Long Do You Depreciate a Kitchen Remodel?

Depreciation for costs of kitchen renovations and upgrades works similarly to the process for depreciating the cost of owning a rental property over time. The standard depreciation period for home improvements is 27.5 years.

However, individual appliances that have shorter lifespans may have shorter depreciation periods.

Counting the Ways a Kitchen Remodel Can Benefit You

Most people aren't thinking about taxes when they complete a house renovation that includes a sparkling kitchen remodel. They just want a dream kitchen they can love showing off!

However, it's important to know about the perks of "cashing in" any home improvements you pay for during the span of owning a home to get the tax benefits if you ever sell.

Of course, the deduction available for capital improvements does make the idea of renovating a kitchen to sell your home for more money an attractive option.

Can you write off home improvement expenses on your taxes? While there's no black-and-white answer, there are some situations where upgrading a kitchen leads to a tax deduction.

Sellers and landlords have the most to gain.

Are you mulling over a remodel? The one thing that's for certain is that a beautiful new kitchen will never deduct value from your home!

Bring all of your questions about a kitchen renovation project to the pros at Oceanside Painting & Refinishing by calling 732-818-0092 or emailing phil@oceansidepainting.com today!