Is kitchen remodel tax deductible? Learn what qualifies, what doesn’t, and how to handle deductions for home improvements the smart way.

Is kitchen remodel tax deductible?

Most personal kitchen remodels aren’t fully deductible, but there are exceptions.

If you are reading this post, I know you are going through it. While it is always a nice idea to spruce up your house, home improvements are typically an expensive endeavor. So, it is very understandable if you are looking to see if you can get the incentive of a tax deduction.

Home renovations typically do not qualify for federal tax deductions, but certain improvements may qualify for deductions and credits to help reduce your taxes.

So, before you hire a Kitchen Remodeler, here’s what you need to know about the potential tax benefits.

What Does the IRS Consider as Tax-Deductible When It Comes to Home Improvement?

The IRS has very strict rules on the types of home improvements that qualify for a tax write-off.

You cannot write off general maintenance, such as applying a fresh coat of paint or updating the doorknobs.

However, on things the IRS calls ‘capital improvements,’ you can score a tax benefit.

Capital improvements are significant fixes to a house or property that increase its value, extend its life, or adapt it to new uses. They are typical structural changes, not just routine maintenance, so they are considered when assessing property taxes or when you are selling.

According to the IRS, a capital improvement must last for more than one year or be permanent in nature. The size of a capital improvement can vary, so both individual homeowners and large-scale property owners can make capital improvements.

So, When do Home Expenses Qualify for Deductions

A capital improvement must be a part of the property such that its removal would cause significant damage or decrease in the value of the property itself.

Remember that repairs or maintenance cannot be included on a property’s cost basis. However, repairs that are part of a larger project, such as replacing all your home’s windows, qualify as a capital improvement.

Let’s look at a practical example:

Let’s say someone buys a home for $400,000. A few years later, they spent $30,000 to renovate the kitchen and add energy-efficient windows.

Since these are considered capital improvements, they likely won’t have to pay sales tax to the contractors, and the home’s cost basis increases to $430,000.

Ten years later, the homeowner (who is single) sells the property for $700,000.

If no improvements had been made, the taxable capital gain would be:

$700,000 (sale price)

minus $400,000 (purchase price)

minus $250,000 (capital gains exclusion for single people)

= $50,000 taxable

But because of the $30,000 in improvements, the adjusted cost basis is $430,000. Now, the capital gain is:

$700,000

minus $430,000

minus $250,000

= $20,000 taxable gain

So, the capital improvements helped lower the taxable profit from $50,000 to $20,000.

Now, that you understand this, let’s get to the meat of this blog post.

When a Kitchen Remodel Might Be Tax Deductible

As I mentioned earlier, you cannot just claim a tax benefit on any random project you undertake in your kitchen. Let me break it down further.

1. Kitchen Improvement

This refers to any action you take to extend the lifespan of your kitchen and enhance its overall value. Some of these improvements can qualify you for tax benefits.

For instance, if you are renovating your kitchen to make it more accessible for medical reasons, such as lowering counters for someone in a wheelchair or installing special appliances for a disability, these costs may be tax-deductible as medical expenses.

Note: The IRS will only consider this if the upgrades are medically necessary and prescribed by a doctor.

2. Kitchen Repairs.

This refers to any action you take to maintain your kitchen’s current condition. While most repairs are just repairs, if you carry out these repairs as part of a larger kitchen improvement project, you can still claim some tax benefits.

For example, if you run a home-based business and use part of your kitchen for it regularly, such as baking, catering, or food content creation, you may be able to deduct a portion of your remodeling costs as a business expense.

Note: For the IRS to consider this, your kitchen (or a part of it) must be used exclusively and regularly for work. Just answering emails on your kitchen tab doesn’t count.

Also, if you are staying in a rental home and want to remodel the kitchen, you can usually deduct the cost over time through depreciation or even claim it as an expense, depending on the nature of the improvements.

For instance, if you upgrade cabinets in a rental unit, it could reduce your taxable rental income.

What is Not Tax Deductible

1. Personal or Lifestyle Upgrades

If you are remodeling your kitchen just to suit your personal taste, for instance, installing marble countertops, adding a wine fridge, or swapping old cabinets for trendier ones, it is not considered deductible.

2. Cosmetic Changes

You want a new backsplash, fancy lighting you saw in a magazine, and some high-end finishes. These are not tax-deductible.

Any changes that is made purely for appearances, even if they improve your enjoyment of the home, will not reduce your tax bill.

3. Normal Upkeep

General repairs or maintenance, like fixing a leaky faucet or replacing a broken tile, are also not tax deductible.

In Conclusion: Is Kitchen Remodel Tax Deductible

While there is no direct answer to this question, there are some situations where upgrading your kitchen can lead to a tax deduction.

If the remodel adds lasting value, adapts your home for a new use, or extends its life, it is a capital improvement that helps you when you sell, even if it is not immediately deductible.

If you are in the market for a kitchen renovation, Grand Project Contracting is a pro that knows how to work with your vision.