When it comes to making upgrades to your home, you’re likely aiming for one of two results: better enjoyment or a higher resale value. In many cases, the latter means spending a little more to get what you want, but there are also ways to increase your home’s value without going over budget. Some upgrades that can help you boost your home’s value include energy-saving projects and more livable bathrooms or kitchens. Other options that are often popular with buyers include outdoor improvements and curb appeal, such as fresh paint or updated lighting.
The key to adding value is to keep your upgrade budget within a reasonable range and choose renovations that will appeal to a large group of potential buyers. Expensive finishes such as marble countertops or a swimming pool can turn off some buyers and make your home harder to sell in the future. Likewise, conversions like turning a garage into living space aren’t usually a good idea unless you live in a neighborhood with lots of other homes that have done the same thing.
Certain improvements are also eligible for tax breaks and deductions, although your particular situation will vary based on the type of work you do and how well you track your expenses. In general, capital improvements — such as a new kitchen or bathroom — that add value or adapt your home to other uses are typically tax-deductible. This also applies to additions that change the use of your home, such as a bedroom or kitchen extension. Other eligible projects include adding a deck, installing a new roof or replacing windows and doors. Improvements that improve energy efficiency are also tax deductible, such as upgrading your furnace or air conditioning system and installing insulation in walls, floors and ceilings.
Other taxable projects include improvements that alter your home’s physical structure, such as adding a ramp or handrails for someone with limited mobility or installing a walk-in shower in place of a tub. In general, such projects aren’t deductible the year you do them but can be depreciated over a long period of time and may reduce your taxable income if you rent out part of your home.
Depending on how much you spend on the project, it can sometimes be difficult to determine whether or not you’re getting tax benefits from it, according to Hippo, an online home insurance company that offers proactive protection for your house. In general, you’ll need to save receipts and invoices for any materials or labor costs related to your renovations. You’ll also need to provide detailed descriptions of the work and dates when you made those changes. It can also be helpful to have before and after photos of your upgrades to demonstrate their scope and quality. This will help you claim the proper amount of credit come tax time.