Are plumbing expenses tax deductible? You might ask this question if you are planning on having major plumbing repairs done to your home. You are probably wondering whether you can deduct the cost of repairs, especially as major plumbing repairs can involve drywall replacement, remodeling of attics, etc. Plumbing expenses can easily go into thousands of dollars, even to five figures if your house is larger, so getting a tax break can help reduce the pain significantly.
Is the Cost Tax Deductible?
The simple answer is no. You can’t deduct the cost of a plumbing repair, no matter how major, from your taxes. However, the long answer is a lot less simple. There are, in fact, ways you can offset a major plumbing repair on your taxes.
The reason is that the IRS does not have a category to cover home repairs of any kind. These are considered normal costs of owning a home, and the IRS does not feel the need to offer incentives for you to replace your plumbing (with some minor exceptions). There are a few ways to get a tax break:
If You Have a Home Business or Rent Part of Your Home
If you have a home office and regularly take the home office deduction, then you can deduct any expenses for plumbing repair in that area of your home. Which generally means you can deduct a portion of the total expenses. Check with your tax professional, but generally it should map to the percentage of your home on which you normally take the deduction, typically about 20%. If your home office is a separate building, then you may be able to deduct repairs to that building. You have to already be taking the home office deduction, and it will fall within the home office limits. Also, if the repair counts as an improvement, it has to be depreciated over the “useful life” of the improvement, which for a plumbing repair can be a number of years and make it barely worth deducting.
If you rent out part of your home, you can depreciate it as a rental expense, which allows you to deduct the amount from your rental income. This works much like the home office; if you rent out 20% of your home, you can deduct 20% of a whole-building repair or upgrade. If it only benefits the renter, such as replacing the plumbing specifically in the bathroom they use exclusively, you can deduct the full amount.
Both of these incentives are intended to help reduce business expenses and keep small businesses afloat.
You may be able to get green energy tax credits. In Louisiana, you can look into tax credits, to a maximum of $1,500, if you change to an on-demand or tankless water system. Louisiana no longer offers renewable energy tax credits, but you can potentially get a federal credit if you install a geothermal heat pump or solar-powered water heater.
In order to get any kind of credit, you need to make substantial improvements in efficiency and sustainability. Even without tax credits, you should talk to your plumber to make sure you’re getting the most efficient option for your home, as it will be cheaper in the long run.
If the repair counts as home improvement, then you may be able to add the price of the repairs to the value of your home. This offsets capital gains tax when and if you decide to sell your house. The repair has to be extensive enough to feasibly increase the value of the property, but this is definitely one way you can get a tax deduction on them. However, you won’t see the benefits until you move, and if you are planning on staying put for a while this may not be something you think about.
Make sure that you document everything you spend, though, so that if you do want to take this tax break, you can.
If you pay for the repair with a home equity loan, you can deduct the interest, as long as the loan is not over $100,000. Obviously this isn’t a reason to take out a loan if you don’t need to, but if you do need to, it can help reduce the cost of paying off the loan. You can also add the amount to your mortgage if you are just moving in, which is less paperwork. Do the math, though, to establish whether the deductions on the mortgage are worth it.
Learn More About Tax Deductible Plumbing Expenses
So, while you can’t deduct the cost of plumbing from your taxes, depending on the circumstances, there are a few tax breaks you may be able to benefit from. Contact us to learn more.