Plumbing repairs can be one of the more expensive types of home projects and renovation. Making major changes to plumbing systems may require extensive remodeling of walls, basements, attics and other areas. Out of date plumbing pipes or fixtures may need to be fully replaced. This can be costly for the homeowner and may appear to be such a major change that homeowners are interested in potential tax advantages. While you may be able to save money on taxes through plumbing repairs, it may not be in the way you think.
While home repairs for your primary residence are typically not tax deductible, your plumbing repairs could qualify as a tax deduction if they are part of a home office.
Major Home Repairs
Major home repairs do tend to change the home in impactful ways, adding thousands of dollars or more onto certain aspects, like plumbing. But the expenditure alone does not mean that the cost is automatically tax deductible. Home repairs do not fall under any IRS category that will let you deduct them out of that year's taxes, no matter how much they affect the house or why they were accomplished. However, there are certain tax advantages that you can gain from the work in some scenarios.
Exploring Your Capital Base
The capital base refers to how much the home is worth according to estimates and appraisals. This is an important measurement because it controls how much profit the IRS gauges you make when you sell your house. In this case, a major plumbing repair can often increase the base value of a home. This allows you to sell it for a higher amount without increasing the amount of taxes you have to pay on additional profit, leading to an indirect form of tax deduction.
Working on Home Offices
Another unique exception for tax deductions is the home office. The IRS in general accepts many more business deductions than home deductions. If you use part of your home solely for business purposes, then you will be able to deduct any expenses for plumbing repair in that area of your home. This may mean you can deduct a portion of the total expenses based on how much of your home you use for business, for example.
In some cases energy-related tax credits may be available for major plumbing work. For example, if you use the plumbing repair project to install a geothermal heat pump or upgrade to energy-efficient and applicable piping materials, then you may be able to receive a tax credit. These energy-related credits are often based on individual state regulations or federal laws that can change rapidly, so you should check current standards before you begin the repair.