As tax season rolls around, you start eyeing every receipt, wondering if it can help lower what you owe. Plumbing repairs, upgrades, or that new water heater might have you asking, “Can this go on my taxes?” Midstate Plumbing & Air understands how important it is to save where you can while keeping your Bridgeport, WV home in good shape.
Home Repairs vs. Home Improvements
There’s a difference between a home repair and a home improvement when it comes to tax deductions. Repairs are things like fixing a leaky pipe, unclogging a drain, or replacing a faucet. These are the kinds of jobs that get your home back to normal when something breaks. Improvements, on the other hand, are upgrades. These could be things like installing a new bathroom, replacing all your old pipes with modern ones, or adding a water filtration system to your kitchen. Improvements usually make your home more valuable or make it last longer.
Repairs generally can’t be written off on your taxes unless the property is a rental or a business. So, if you call someone to fix a burst pipe in your home, you probably won’t see any tax benefit. But if you had a plumber redo all your outdated plumbing with new, long-lasting materials, that could be an improvement that adds to your home’s value. That improvement might help lower the amount of taxes you pay when you sell your house because it increases what’s called your home’s “tax basis,” the total of the original purchase price plus what you subsequently invested into your home.
When Repairs Might Be Deductible
If your home is also a rental property, the rules change. When you’re a landlord, repairs can often be written off as expenses on your tax return. Let’s say a tenant calls you because the toilet is leaking. You get it fixed, and that repair cost can usually be deducted that same year. It’s considered a business expense since it’s part of keeping the property in working shape for your tenants.
But even with rental properties, bigger jobs might still be considered improvements. If you replace all the old plumbing in a rental home, that’s an upgrade. That cost will likely need to be spread out over several years as a depreciation expense instead of being deducted all at once. It’s a bit more complicated, but it’s still a way to reduce your taxes over time.
Another situation where repairs might be deductible is if you run a business out of your home. If you have a home office and a plumber has to fix a pipe that runs through that part of the house, you may be able to deduct part of that repair. It usually depends on how much of your home is used for business and how much of the repair affects that space.
Energy-Efficient Upgrades and Tax Credits
Certain plumbing upgrades can qualify for tax credits, especially if they make your home more energy-efficient. These are different than tax deductions, however. A deduction lowers the amount of income you’re taxed on, while a tax credit reduces the actual tax you owe.
Replacing an old water heater with an energy-efficient one might qualify for a federal tax credit, which is currently 30% of the unit’s cost up to a maximum credit of $2,000, and a West Virginia state income tax credit of up to $600. Only certain energy-efficient models are eligible for the credit, however. In addition, if you make certain types of energy-efficient improvements to your home, you may be eligible for a federal tax credit up to $3,200.
These programs are subject to change, so it helps to check what’s available when you’re planning plumbing upgrades. You might find that the new water heater you’ve been thinking about comes with a nice tax break that makes bearing the upfront cost feel a little easier.
Keeping Track of Your Plumbing Costs
Whether you’re making small fixes or investing in a major upgrade, keeping good records is important. Save your receipts, and if you work with a plumber, hang onto the invoices. It’s a good idea to jot down a quick note about what the work was for whether it was fixing a leak under the sink or installing new pipes in the basement.
Learn More Today
Taxes are complicated, and home repairs like plumbing don’t always fit neatly into a yes-or-no deduction box. Keeping track of what counts for home improvements, energy-efficient upgrades, or rental properties can give you a real advantage. When plumbing problems come up or you’re planning an upgrade to your kitchen or bathroom plumbing, reach out to Midstate Plumbing & Air to get the work done right.
