Planning a kitchen renovation is a costly endeavor. It’s not just about the cost of knocking down walls and re-shaping the layout. A great kitchen remodeling or renovation project will add new appliances, countertops, cabinets, and flooring.
With so many items required to achieve your coveted look, you may wonder if you can claim kitchen renovation expenses on your taxes in California. Unfortunately, the immediate answer is no. If you renovate your primary residence, kitchen renovation expenses are not considered tax-deductible expenditures unless you shift to alternative energy equipment.
The IRS currently offers tax credits for homeowners shifting to alternative energy equipment. The renewable energy tax credits cover kitchen appliances, solar water heaters, and geothermal heat pumps. You can check with the IRS or the California Energy Commission for more information on how to qualify. We like the renewable energy tax credit because energy-efficient products will save you money in the long run, and the tax credit is a dollar-for-dollar reduction.
If you are hesitating about the costs of your kitchen renovation, keep in mind that money spent on home improvement projects contributes to the $250,000 (single) or $500,000 (married) total that is exempt from capital gains taxes when you sell the property.
Therefore, any money spent on your kitchen renovation is used as “basis points” to reflect the cumulative investments made into your home, reducing your capital gain tax payment. As a homeowner, you recuperate the taxes spent on renovations when you sell the property. Ensure that you keep your transaction records during your home ownership, as any money spent on capital improvement can provide you with more tax-free profit when you sell. Visit Topic No. 701 for additional details.
So while the costs of your kitchen renovation might not be immediately tax-deductible, it can provide you with more value down the road. And, if you’re making energy-efficient improvements, you can take advantage of current California tax credits.
Never skimp on quality during your kitchen renovation, as you will pay the price for it later. Working with a professional will reduce unnecessary expenses and headaches during your kitchen renovation.
The Creative Innovative Developers team can help you determine which materials suit your needs and budget. We can also work with you to find the ideal layout for your space. Our team has a wealth of experience in kitchen renovations and can offer you innovative ideas to help save money and create a gorgeous new space. Contact us today to get started.