Home repairs and renovations often improve the value of a home. However, claiming them on your taxes is another story. Claiming repairs all depends on what kind of home repairs or renovations you have made to your home and how well you’ve documented the expenses.
Can Repairs And Renovations Be Deducted?
Home renovations are not generally expenses that can be deducted from your federal taxes, but there are specific home renovations and improvements that can lower taxes owed. These include:
- Home office work: You can deduct labour and material costs for minor repairs or maintenance done to property you use to earn business income (Line 8960 – Maintenance and repairs). The home office must be the primary place of business or used exclusively to earn income from the business, and it must be used regularly for meeting clients and customers.
- Increased accessibility: Renovations that make homes safer or more accessible for seniors or the disabled may also qualify for a tax credit. If the renovation improves safety in the home and is permanent, it is eligible under the Home Accessibility Tax Credit. Seniors, valid disability tax certificate holders, and supporters of qualifying individuals can claim up to $10,000.
- Energy efficiency: If you’re considering upgrading your home’s energy source, take advantage of the credits while you can: tax credits for residential renewable energy products will be available through December 31, 2021. These are renewable energy tax credits for projects like fuel cells, small wind turbines, solar energy systems, and geothermal heat pumps.
Unfortunately, all Federal tax credits for residential energy efficiency, the building of energy-efficient homes, and deductions for energy-efficient commercial buildings have all expired. You can find rebates and incentives from several different groups in Ontario, including Enbridge Gas Distribution, Hydro One, Independent Electricity System Operator, and the Ontario Electricity Support Program. However, these cannot be claimed at tax time.
Save By Keeping All The Paperwork
While you can’t deduct the cost in the year you spend the money, keeping track of those expenses may help you reduce your taxes in the year you sell your house. Even if you don’t get to claim some of the work, you must keep everything just in case. This is because, under the home sale tax exemption, the seller does not have to pay capital gains on the increase in the value of the residence if they profit $250,000 or less if filing as single, and $500,000 or less if filing jointly. This stands for the primary residency.
Home renovations increase the amount your home is worth for tax purposes. Thus, they can help reduce the amount of your sale price that is counted as profit, and therefore can potentially help get you under the home sale exemption to avoid capital gains altogether. Even if it doesn’t, the increased worth can still limit what is taxable in the sales price. It can be confusing, but keep the receipts for everything and talk with your broker or accountant about it if you’re planning on selling your home!