Is Kitchen Remodel Tax Deductible?
Kitchen remodels are one of the most popular home improvement projects. Many homeowners face whether or not they can deduct their kitchen remodel on their taxes as a business expense. In this blog post, we’ll explore the answer to this question and give you some insight into what may be considered deductible in your situation.
Is Kitchen Remodel Tax Deductible?
The short answer is no. If you are using your home purely for a personal residence, then any renovation expense is not tax-deductible. If you plan to rent your home out in the future (or are renting it now), a kitchen can be an improvement and may qualify as a possible deduction.
There are two main ways homeowners take deductions: capital expenses and income-producing property improvements, also known as Section 179 deductions for businesses. This means that if you want to deduct your kitchen remodel, it needs to be one of these two types.
This category is for things like home improvements that improve the value or quality of a property. You can’t deduct any expense where the main reason for doing it was personal enjoyment and not business-related. The IRS says capital items are assets with an expected life of more than one year that produce income in excess of $400 per item (or $200 if half-year convention applies).
Capital expenses include costs like additions, building landscaping, fencing, floors/walls enclosing adjoining land owned by someone else on which you conduct residential rentals or farming activities, as well as permanent fixtures such as appliances and plumbing installed inside the house.
You must be able to show that the cost of your kitchen remodel is a capital expense rather than an improvement. An example would be if you are installing new cabinets and granite countertops to lease out your property for more money.
Income-producing property improvements:
Add a backsplash that is made from a durable material like quartz or ceramic.
If you’re improving your home with renovations so it can provide income (such as renting it), then this category may apply instead. You’ll need to file Form 8829 used by taxpayers who have a depreciable business or rental properties and want either additional first-year depreciation or faster write-offs under MACRS rules.
You will also need to complete Section B on page one of IRS form T2290 General Business Credit. It provides a non-refundable credit for certain expenditures that are not otherwise deductible but can be used to create or increase business income.
What home improvements are tax-deductible 2021?
If you’re not sure which category your kitchen remodel falls under, you can talk to a tax professional and ask them about deducting the expense on your taxes. They will help you with any questions or concerns that may arise when filing an itemized deduction for home improvement expenses.
Is a new kitchen an allowable expense?
It can be either a revenue expense or a capital expenditure. If it is the latter, it needs to be depreciated over 27.562 years or 39 years if new cabinets are installed. They qualify for the “Section 179 Deduction,” which is a non-refundable credit that can create or increase business income.
How does tax-deductible work on a kitchen remodel?
As pointed out earlier, the only sure way to get tax deductions from your kitchen to remodel is to work from home or use your home as an office/business. This way, the cost of your remodel can be considered an improvement, and you may qualify for a possible deduction. Again, you will need to talk to a tax professional and ask them about deducting the expense on your taxes.
It is possible to deduct a kitchen remodel on your taxes, but you’ll need to talk to a tax professional and ask them about it. But as discussed, if you’re using your home as a business, you can deduct your remodel’s cost.