A home is the largest single purchase most Americans will ever make, so it makes sense to keep your home in good repair. Even new homes need regular maintenance to keep them in top shape. There are a number of expenses associated with buying a new home that may be deductible on your federal income taxes. Repairs to your new home are typically not among them, unless you use your home for business purposes.
The Internal Revenue Service recognizes four primary categories of deductible expenses associated with the purchase of a new home. You may deduct certain real estate taxes, provided the taxes are imposed on you by a state or local taxing authority and the taxes are based on the assessed value of your home. You may deduct the mortgage interest from a loan that is secured by your first or second home. You may elect to deduct your sales taxes, including the sales taxes on your new home, instead of deducting your state income taxes. You may deduct mortgage insurance that is required by your lender. Repairs to your new home are not among the categories of deductible expenses allowed by the IRS.
You may include certain expenses associated with improving your new home to the cost basis of your home. The increased coat basis of your home -- the money you put into improvements -- means you would have a lower taxable gain when you decide to sell your home. This would lower your capital gains tax obligation, but this is not the same thing as a tax deduction on your income taxes. The Internal Revenue Service considers things that significantly prolong your home's useful life, significantly add to your home's value, or adapts a portion of your home to a new use to be improvements. Paving your driveway, rewiring your home, replacing the roof or adding a bathroom are examples of improvements, according to the IRS. Expenses for improvements to your new home are not deductible on your income taxes.
The Internal Revenue Service makes a distinction between improvements and repairs. Repairs are physical things you do to maintain your home in an ordinary, efficient operating condition, such as painting the exterior or patching the roof. Since repairs don't prolong your home's life and do not add to your home's value, the IRS does not consider a repair to be an improvement. You may not deduct the cost of repairs to your new home when you file your taxes. You cannot add repairs to the basis of your home unless they are performed as part of a major restoration or remodeling job.
Business Use of Home
You may be able to deduct a portion of the expenses associated with repairs to your new home if you use part of your home regularly and exclusively as your principal place of business. The amount of the repairs that you may deduct depends on whether the repairs were directly related, indirectly related or unrelated to your business. If the repair was directly related to the part of your home that you use for business, such as repairing an electrical outlet in your home office, the repair would be 100 percent deductible. A repair that was needed for the operation of the entire home, such as replacing a circuit breaker on your central air conditioning system, is an indirect expense. You may only deduct the percentage of these repair expenses that correspond to the business use percentage, which is determined by dividing the number of square feet in the home that you use for business purposes by the total square feet in your home. Repairs that only apply to parts of your home that don't relate to your business, such as replacing the light fixture in your bedroom, are not related to your business and are not deductible at all. If you use your home for business purposes as an employee you must itemize your deductions on Schedule A to claim these repairs. If you are self-employed you would report repair expenses on Schedule C of IRS Form 1040.
Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.