Although replacement of plumbing pipes may be minimal in expense, it’s the removing and restoration of the surrounding and affected areas that are costly. Making major plumbing changes may result to remodeling of walls, ceiling and flooring.
Deteriorated plumbing pipes and toilet fixtures will also have to be replaced. This makes homeowners ask, “Are plumbing repairs tax deductible?” because tax advantages seem like a good return on investment.
Yes, plumbing repairs are tax deductible but it doesn’t work in the same way that you expect. The entire cost of the plumbing repair is not deductible in one year, regardless of the reason for renovation and the scale of the repair. Read on to learn more.
Table of Contents
Any work done to your home to increase its value or to extend its life is considered as “capital expense”. This means you can’t consider it as a one-time expense that you can deduct in your tax declaration. Instead, the cost must depreciate over a period of many years.
Improvements like replacing a roof or renovating a bathroom entail more work and more cost than a minor repair. Hence these improvements are seen to add value and extend the life of your home. If the renovation costs R100,000, you can’t deduct it entirely in one tax year.
You need to keep track of these depreciated expenses because when you sell the property, the taxes will be based on the depreciated amount.
Other examples of plumbing improvements include adding a septic system, water heater, soft water system and filtration system.
Next, I will discuss more tax terminologies and other ways for you to get tax advantages.
The capital base refers to the value of the house according to estimates and bank appraisals. This is a critical measurement because it dictates how much profit the SARS thinks that you will make when you sell the house.
In this case, a major plumbing repair will increase the capital base of your home. This will let you sell it at a higher price without increasing the amount of taxes you have to pay for the profit that you received. This is therefore an indirect way of tax deduction.
Another way to be exempt from tax deductions is by having a home office. The SARS allows more business deductions than home deductions. If your business is located at home, you can divert your plumbing repair expenses as part of your business expense. Or a portion of the repair will go to business expenses if only a portion of the house is used for business.
Use of energy efficient or sustainable technology in your home qualifies you to an energy-related tax credit. If the plumbing repair work is used to install a solar heat pump or if it’s to upgrade to sustainable water pipes, you can avail of tax credits.
The amount of the credit will depend on the city regulations. You should verify this with local jurisdiction before proceeding with the repair.
Tax Deductible Repairs
Repairs are considered one time fixes that keep your house in good working condition. As an estimated guide, most repairs that can be considered tax deductions cost around $500 and below.