Is a home inspection tax deductible? | Explained

The real estate market is booming – and so is everything related to it.

That means fees, taxes, and costs are going up as well. Fortunately, you can write off certain things in your taxes; that way, you can save some money after all it’s said and done.

In this article, we’re going to talk about home inspections and tax deductions.

Can you deduct your home inspection from your taxes?

If we’re talking about your primary home, an inspection isn’t tax deductible. On the other hand, you can deduct the cost of a home inspection for an investment property.

There’s a little more to it than that – and we’re going to talk about it down below.

Is a home inspection tax deductible?

Home inspection tax

Simply put, you cannot deduct a home inspection for the house you live in. You can only use a home inspection for tax purposes if you own that property as an investment.

It doesn’t matter if it’s your first or tenth property, a house on the lake or a boat, etc. – as long as you live inside of it, the IRS considers a home inspection a personal expense.

Broadly speaking, the IRS won’t let you deduct most personal expenses. There are a few of them that you can, but then again, it has to be tied to financial stuff or investments for that to happen.

For example, mortgage payments are often tax deductible.

While that seems like bad news, a home inspection will not set you back that much. On average, home inspections tend to cost a couple of hundred dollars – and that’s one of the cheapest things that comes with buying or selling houses!

Why is my home inspection non tax deductible?

So, you have found out that you need to book a home inspection – but you can’t deduct it from your taxes. That means you’re living inside that property, which means the IRS considers a home inspection a personal expense.

Is there any exception to the personal expense rule and home inspections? Unfortunately, there isn’t. There’s no way to deduct a home inspection for your personal house.

But wait! There’s more than one way to own a property. Investment properties and businesses do get a tax break on home inspections – because, in that scenario, inspections do not qualify as personal expenses.

For homeowners, though, you’ll have to look elsewhere to save some money on taxes.

The good news is, there are plenty of tax benefits – especially if you’re self-employed and working from home. We’ll talk about that down below.

Are house appraisals tax deductible?

house appraisal

If you haven’t booked a home inspection already (and now know they are not tax deductible), you’re probably wondering: what if I get a house appraisal instead?

Is an appraisal tax deductible? Unfortunately, an appraisal isn’t deductible either. Once again, if you’re doing it for your primary home (and not an investment property), this also falls under personal expenses.

And, similarly to home inspections for investment properties and rental incomes, an appraisal is tax deductible for business purposes alone.

Now, keep in mind that the term “business purposes” applies to properties you use exclusively for business.

If you’re doing a home inspection to buy or sell a home, that doesn’t necessarily make it a business purpose – even if we’re talking about a soon-to-come business transaction:

A home inspection on a property you want to flip falls under business purposes.

A home inspection on the house you live in, not so much (even if you’re about to make money on a sale).

When is a home inspection tax deductible?

You can only deduct a home inspection from your taxes when you’re doing it for a rental property. There are no exceptions to this rule – and the IRS is pretty clear about that!

We have thoroughly covered the subject in this article. Unfortunately, a lot of people have a hard time understanding what separates a tax deductible home inspection from a non tax deductible one.

So, to simplify things, let’s put it this way:

  • Do you live in that property? If your answer is yes, you cannot deduct a home inspection. The IRS deems it a personal expense.
  • Does that property provides rental income or works as a business? If that’s so, you may be able to deduct it – as long as you’re not living there!

That’s right: you can only deduct a home inspection if your property is for business purposes only. If you rent one of your bedrooms, that sort of makes your house a business – but, under those circumstances, the IRS considers the inspection a personal expense still (because you live there).

Is a home inspection important?

Not only a home inspection is important, but it’s necessary!

Sure, it’s not required by law for you to do a home inspection before you buy or sell a property, but it grants every party involved peace of mind.

Why is a home inspection important? Because it’ll help you understand how things are truly doing in the property you’re interested in.

Even if you do a thorough search on your own, you may miss mold, poor plumbing, or faulty wiring, among other things.

More often than not, skipping a home inspection tends to costs more money in the long run.

FAQ

What are tax deductions?

A tax deduction is a certain amount of money that you can ask the IRS to remove from the amount of taxes you owe. Simply put, it’s a way to pay less money to the IRS.

Of course, it’s a little more complicated than asking the IRS to forgive your taxes. Certain rules and regulations apply to deductions – as well as limits and exceptions that you have to learn about.

Home inspections are the perfect example of how tax deduction works. You will not get one if it’s related to a personal expense (the house you live in) but the IRS will grant you a deduction if it’s a business expense (a rental property).

Pretty much all tax deductions work that way.

Is it true there’s a limit on the deductible amount?

Yes, the IRS has a limit on how much money you can deduct from your taxes every year. This doesn’t mean there’s a limit on how many deductions you can claim, though.

Depending on your income, net worth, and a few other factors, the IRS will allow you to deduct more or less money. Not only that, but each deduction may have a limit on its own.

For example, it’s not the same to claim deductions related to mortgage payments as it is to home improvement costs – each one of these two has a different limit on how much you can deduct.

You should be aware of how much you can deduct yearly. It’s not uncommon for people to get overconfident with their tax deduction math and end up in debt to the IRS.

When in doubt, consult with your local accountant.

Do homeowners get any tax benefits?

Of course they do! In fact, there are several benefits for people who work from home. The IRS came up with a deduction for self-employed workers who have a home office.

That way, they can separate personal expenses for business expenses – right from home!

Before you start filling up forms, keep in mind this only applies if your house is your principal place of business. If you have an office someplace else, having a second office at home isn’t going to cut it.

Just to make it clear, a home office doesn’t turn your house into a business. You cannot deduct a home inspection if you have a home office. We’ve talked about that above.

What kind of home expenses are tax deductible?

There are a lot of things you can deduct from your house expenses. It’s important to remind you that home inspections are not part of what we’ll talk about in this section.

Usually, things related to your mortgage payments are tax deductible. This includes interest payment, insurance, and down points. Local real estate taxes are also tax deductible.

So, for example, if you are paying expensive mortgage insurance – it’s not all so bad! You can deduct it from your taxes.

Unfortunately, there’s a limit to how much you can deduct. It depends on your income, net worth, marriage status, and a couple of other things – so it’d be hard to tell what your deduction limit is.

You can find out more information here.

Can home improvements be tax deductible?

Yes, absolutely! Anything that the IRS considers a home improvement is tax deductible.

Keep in mind the IRS may not consider certain things a house improvement – even if you do. For example, installing an AC unit may seem like an incredible improvement during a hot summer evening – but the IRS doesn’t deem that tax deductible.

For the IRS to consider something a home improvement, it has to add value to your property or increase its useful life. For example, adding a new room to the house. You can deduct certain costs from that.