As a homeowner, there may be several questions plaguing your mind about the welfare of the home and that of your pocket. As you keep your home in a semblance of order with certain home improvements, a question must have crossed your mind: “can I claim home renovations as tax deductions?” While you are thinking about how to get a tax break for all the money spent on home improvements, there are many possible answers. For details contact info@cantoraccounting.com.au.

1. CAN I CLAIM HOME
RENOVATIONS AS
TAX DEDUCTIONS?
PRESENTATION
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2. CAN I CLAIM HOME RENOVATIONS AS
TAX DEDUCTIONS?
As a homeowner, there may be several questions
plaguing your mind about the welfare of the home and
that of your pocket. As you keep your home in a
semblance of order with certain home improvements, a
question must have crossed your mind: “can I claim
home renovations as tax deductions?” While you are
thinking about how to get a tax break for all the money
spent on home improvements, there are many possible
answers. However, a certain fact is that you must not
misplace the expenses from all home improvement
and beautification procedures.

3. COMMON
EXAMPLES OF
HOME
IMPROVEMENT
ARE:
• Installation of air conditioning
• Replacement of roof
• Addition of sunroom
You cannot deduct the cost in the same year you spent the
money – it is utterly impossible. In the event that you sell your
house, a well-kept list of expenses may result in a reduction of
taxes at that very moment.

4. REPAIRS VERSUS
IMPROVEMENTS
There are two
categories of money
you spend on your
home according to
tax – the cost of
repairs versus the
cost of
improvements. Cost
of capital
improvements is
added to the tax
basis in the house.
What is a tax basis?
To determine the
amount of your profit,
you subtract some
amount from the sales
price. This amount is
known as the tax
basis. However, a
capital improvement
is a feature that
prolongs the life of
the home by adding
value and increasing
the adaptability to
new uses.

5. ALSO, THERE ARE NO STRICT RULES CONCERNING THE LIST OF
QUALIFIED FEATURES. BUT YOU CAN ADD TO THE COST OF
CERTAIN ADDITIONS TO THE HOME SUCH AS:
• A swimming pool
• A new central air-conditioning system
• A new roof
• An extra water heater
• Storm windows
• Home security system
• Intercom

6. COMPARED TO THE PAST,
TRACKING IS LESS CRITICAL
Nonetheless, some energy-saving home improvements yield tax credits at
the same time of making them.
Although the list is not restricted to big-ticket items, big items seem to
attract the most amounts.
On the other hand, the cost of repairs is not included in the basis. Rather
than improvements, painting a room, fixing a gutter and replacement of
window pane is a list of repairs.
In the past years, homeowners made a habit of keeping receipts for
processes that were similar to a home improvement. When the house was
sold, every additional dime to the basis was a dime less than the taxes of
the IRS. Recently, there is no guarantee that tracking the basis will be
profitable as home-sale profits are free of tax for homeowners.

7. WHEN YOU
SELL, SAVE!
The current law shows that the profit on
the sale of the principal residence is tax-
free for the first $250,000 profit. For
married couples, the amount is $500,000 if
they file joint returns. But the condition I
that the homeowner must be a resident of
the home for up to two years out of the five
years before the sale.

8. Passing this rule into law was the onset of a ruckus. Several
advisors had interpretations that the homeowners would be
unable to track their basis. The assumption was based on the fact
that it was unearthly impossible to sweep about half a million in
profits on a single home. More so, a homeowner that has resided
in a home for several years knows that the large exclusion is
insufficient when compared to the profit that is accruable to such
longstanding home. Therefore, keeping good records is a
necessity.
When you want to determine the size of the profit when you
sell a house, there are certain things to consider:
• Everything you paid for the house
• Original price of purchase
• Fees

9. Add all three items to the cost of improvements that you have made in the past
few years and you will arrive at an amount known as the ‘adjusted basis’. Prior
to the 5th of August, 1997, all sold homes whose homeowners took advantage
of the old rule where home sellers can put off tax on their profit by simply
rolling over the profit into the new home makes the adjusted basis a bit lesser
due to reductions from the roller-over profit itself.
Now, compare the sales price of the house with the adjusted basis. Generally,
profit that is greater than $250,000 for individuals or $500, 000 for married
couples may be prone to taxation. On the other hand, there are no deductions
in losses on sales of personal residences.
For these reasons, it is absolutely important and beneficial to keep a list of money
expended in an expansion, fixing up, or repair of the house. Apart from proper
documentation, it also avoids or reduces taxes after sales.

10. • For any improvement, you make in the home, pile up the receipts in a neat
stack. You may get a special folder to document these receipts and records.
• A portion of your profile on sale may be taxable if you have lived in your
house for several years. Also, it is applicable to you when you have
accumulated area housing prices after donkey years of living in a home. But
there is a solution. To reduce the tax gain, you can include the
improvements in the house’s cost basis.
You may be able to write off part of the adjusted basis of your home through
depreciation if you operate a business from the confines of your home or put up
part of the home for rent. When you do so, the process of selling the house will
not include an exclusion of the amount of depreciation. If you took a gain
exclusion break of about $250,000 and $500, 000, you definitely cannot exclude
the depreciation amount. Besides, the repair cost to that portion of the home
may at that moment, be deductible.
Be prepared!

11. THANK
YOU
For the purpose of the tax, home improvements are
facelifts for the home. If your home is for residential
purposes, home improvements may not be deductible.
OFFICE
(02) 9411 1134
www.cantoraccounting.com.au
33 Myra Avenue RYDE
NSW 2112
info@cantoraccounting.com.au
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