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Know the Difference: Home Repairs vs. Improvements for Tax Savings

Owning a home in Newnan, Peachtree City, or anywhere in Southside Atlanta means you’ll likely face the need for repairs or improvements at some point. But did you know that understanding the difference between a repair and an improvement can significantly impact your taxes?

Here’s what you need to know to maximize tax benefits when maintaining or enhancing your property.

Repairs vs. Improvements: What’s the Difference?

The IRS defines repairs and improvements differently, and the distinction matters for tax purposes:

  • Repairs restore your home to its original condition without increasing its value. Examples: fixing a leaking faucet, patching a roof, or repainting a room.
  • Improvements add value, prolong the home’s life, or adapt it for new uses. Examples: installing energy-efficient windows, building a deck, or replacing an entire roof.

Only improvements can increase your property’s tax basis or qualify for certain tax credits. Repairs, while essential, typically don’t provide direct tax benefits.


What About Maintenance?

Maintenance tasks like gutter cleaning or lawn care ensure your home stays in good condition but don’t qualify as repairs or improvements. Think of maintenance as preventive care for your property.


Tax Benefits for Home Improvements

1. Selling Your Home

When you sell your home, the costs of qualifying improvements can be added to your adjusted tax basis, which reduces your taxable gain.

For instance:

  • Original purchase price: $300,000
  • Qualified improvements over time: $50,000
  • Adjusted tax basis: $350,000

If you sell your home for $400,000, your taxable gain is only $50,000—not $100,000.

2. Energy-Efficient Upgrades

Homeowners in Georgia can claim federal tax credits for specific energy-efficient upgrades, such as:

  • Solar panel installations
  • Energy Star-certified windows and doors

Credits are claimed in the year the improvements are completed, making this a powerful incentive to go green!

3. Medical and Home Office Deductions

Certain modifications for medical purposes, such as wheelchair ramps or bathroom grab bars, may qualify for deductions. Similarly, improvements made to a dedicated home office might also be deductible. Be sure to consult with a tax advisor to confirm eligibility.


How Investment Properties Are Treated

If you own rental properties in Coweta or Fayette counties, repairs are deductible in the year they’re made. Improvements, however, must be depreciated over several years. This distinction is crucial for managing cash flow and tax planning as a landlord.


Stay Organized to Maximize Benefits

To fully leverage tax benefits for your home improvements:

  1. Document Every Expense
    Keep all receipts and records, including labor costs. Whether it’s a digital folder or a home improvement app, tracking expenses ensures you’re prepared come tax season.
  2. Understand IRS Guidelines
    Familiarize yourself with IRS Publication 523 to understand what qualifies as an improvement or deductible expense.
  3. Work With a Tax Professional
    Tax laws can change, and having a trusted tax advisor ensures you get the maximum benefit.

Closing Thoughts

Investing in your home is more than just preserving its value; it’s an opportunity to potentially save money through tax benefits. Whether you’re upgrading your Peachtree City ranch or making eco-friendly improvements to your Newnan craftsman, understanding these distinctions is key.

If you have questions about your home’s value or would like recommendations for trusted tax advisors in the area, feel free to reach out. As always, consult with your tax advisor for specific advice tailored to your situation.

📧 Contact Me Today to learn more about maximizing your home’s value and investment potential.

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I'm Morgan and I love helping professionals in the aviation industry make their move to Atlanta as smooth as a greased landing.  Whether its relocation, buying for the first time, or selling luxury and aviation real estate properties, I can help you transition smoothly.  

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Hi there!

I'm Morgan and I love helping aviation industry professionals make the move to Atlanta through relocation, buying for the first time, or selling luxury and aviation real estate properties.  

schedule your free consultation

Buy

My Listings

Sell

All Articles

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