The IRS allows homeowners a wide range of deductions for expenses that relate to the home; however, the cost of making house repairs is not usually deductible. This remains true irrespective of whether you have insurance coverage or not. There is one exception to this rule when the repair is necessary because of a casualty you suffer. However, this type of deduction will require a reduction for insurance proceeds.
Deductible Casualty Losses
A casualty loss is a sudden or infrequent event that causes damage to your home. Common examples of a casualty are a hurricane or other storm that destroys part of your home’s structure, such as your roof or windows. However, the repairs you have to make after the storm passes are deductible as long as the damage is a direct result of the casualty. For example, if a window in your home is already broken, you cannot claim the entire cost of repairing that window, even if a hurricane makes it worse.
Repair Versus Improvement
It’s also important that you distinguish between a repair and a permanent home improvement. A repair essentially puts the home back in the same condition it was in before the casualty event causes damage. In contrast, a home improvement is more significant than a repair in that it prolongs the useful life of the home, increases its value or makes the home suitable for a different use. Therefore, if a storm causes damage to your home and you decide it’s a good time to start working on that home improvement project, the IRS will disallow any deduction for its cost. The purpose of the deduction is to put the home back in the same condition it was in before the event and doesn’t present an opportunity to claim deductions for costs that are unrelated to the casualty.
Casualty Loss Calculation
When you calculate your casualty loss deduction, you cannot claim a deduction for 100 percent of your repair costs. In most cases, the cost of reasonable repairs is your starting point for the deduction, since it also represents the decrease in fair market value of the home because of the casualty. Ordinarily, you reduce this amount by any insurance reimbursement you receive, but since you have no insurance, the next step is to reduce it by $100. The result is only deductible to the extent it exceeds 10 percent of your adjusted gross income.
You Must Itemize
One thing to note about the casualty loss deduction is that it’s only available to taxpayers who itemize their expenses. Therefore, if you claim the standard deduction, you cannot deduct any of your repair costs. However, in the year you make the repairs, you should reevaluate whether the increase in your repair expenses brings your total deductions higher than the standard deduction, thereby making it beneficial to itemize.
Jeff Franco's professional writing career began in 2010. With expertise in federal taxation, law and accounting, he has published articles in various online publications. Franco holds a Master of Business Administration in accounting and a Master of Science in taxation from Fordham University. He also holds a Juris Doctor from Brooklyn Law School.