Question

I am in the process of upgrading my home with home improvement projects. Can I deduct the cost of a new roof?

Answer

Unfortunately, you cannot deduct the cost of a new roof. Installing a new roof is considered a home improvement and home improvement costs are not deductible.

However, home improvement costs can increase the basis of your property. For most homeowners the basis for your home is the price you paid for the home or the cost to build your home.

Home improvements increase the basis of the property. This is called the adjusted basis. Some examples of improvements that may increase your basis include:

+ Replacing the entire roof
+ Rewiring the home
+ Putting an addition on the home
+ Installing central air conditioning
+ Paving the driveway

You will need to keep records of all home improvements made to increase the basis or determine the adjusted basis of your property. As you improve your home you increase your basis. Use your adjusted basis to determine the gain on your property when you sell it.

The higher the gain, the more tax you will pay when you sell the property. The adjusted basis helps to offset the gain by increasing the base value of the home. Homeowners with taxable gain may qualify to exclude all or part of their gain if they meet ownership and use requirements. View more information on the home sale exclusion.

For more information about adjusted basis, visit the IRS website.

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