Is Fencing Your Yard Tax Deductible?

Fencing your yard contributes to your home's "tax basis." This means it only provides a tax break when you sell your home. Until then, you cannot deduct the cost of building a fence. The IRS implements a few additional restrictions that may not allow you to add the cost of building a fence to your tax basis, such as if you repair an existing fence or do the work yourself.

IRS Publication 530 specifically lists "building a fence" as an example of a home improvement. Home improvements cannot be deducted from your taxes. However, they add to your home's "tax basis," which means you won't have to pay tax on the value of an improvement when you sell your home.

​Read More:​ An Overview of Itemized Deductions: Definition, How to Claim & Limitations

You bought your home for ​$200,000​ and then spent ​$50,000​ on home improvements – including building a fence. You sell the home for ​$300,000​. Instead of paying taxes on the full ​$300,000​ sale price, you can deduct the tax basis: the original cost of the home plus the cost of the home improvements. ​$300,000​ minus a tax basis of ​$250,000​ leaves you with just ​$50,000​ profit subject to tax.

Note that the IRS differentiates between a repair and an improvement. If you purchase a home that has an existing fence in disrepair, you cannot add the cost of fixing the fence to your tax basis. Repairing it is considered maintaining the home in an "ordinary, efficient operating condition."

Replacing rotten wood on the fence or paying someone to stretch the sagging chainlink would be considered repairs. Completely removing the old fence and building a brand new one may be considered an improvement if the new fence is significantly different from the old fence and therefore adds to the value of the home. Talk to your tax adviser about your specific situation to confirm.

When calculating how much to add to your tax basis after building a fence, you can add the cost of the fence materials and professional labor. You can also figure in the cost of rental equipment, like an auger. However, you cannot put a price on your own labor.

If you happen to own a fence-building company and want to build a fence in your own yard, consult your tax adviser about how to proceed so that you can add the labor to your tax basis.

You can only add the cost of building a fence to your tax basis one time. However, you can use the most recent fence improvement costs.

​Read More:​ Schedule A: Instructions on How to Itemize Deductions

You bought a house 15 years ago with no fence. You had a picket fence installed shortly after purchasing the home. Now, you've replaced that fence with a six-foot privacy fence. The cost of the first fence is removed from your tax basis, and the cost of the second fence is added instead.

According to IRS Publication 527, you can deduct the depreciation of a rental property improvement. You must own (versus rent) the property to claim these deductions. This means you don't have to wait to sell the property to claim the expenses. Instead, you can claim some of the fence's cost each year.

When calculating depreciation, note that the IRS considers fences to be 15-year property under the General Depreciation System and 20-year property under the Alternative Depreciation System.