How to Make Home Improvements That Benefit Your Bottom Line
I’ll let you in on a little secret…
My brain is wired a bit differently than most. Any time I'm looking at making a move, tackling a home project, or outlining financial goals, I start daydreaming of curiosity. What will happen if I do X? Are there rebates, credits, tax savings, or ways to save if I pull the trigger on this idea? Who do I need to talk to, or what do I need to read up on to find answers to all of my questions?
See, I told you! It's almost like a game of chess to me. I know there are dozens, if not hundreds, of different incentives that I'm not aware of. So, I've taught myself to be curious and learn before acting. More often than not, if you start asking simple questions to experts or asking Google about an idea that pops into your brain, there will be something to learn and apply to your life.
That's how I approach every big decision I make regarding my finances. Don't get me wrong, there are more moments than not when I have a steep learning curve after I take action, but I learn along the way nonetheless. And then, thanks to my desire to be my own guinea pig, I would love to take what I learn and share it with you! I'm obsessed with making every penny count and find SO MUCH joy in educating others on how they can do just that.
This leads me to one of my biggest lessons coming out of 2024...
As a homeowner of a beautifully renovated 2-story, I decided 2024 would be the year I put renters into my home and move to the city for a few months. I knew there would be multiple benefits, including an increase in passive rental income and strategic ways to execute home projects that would then become a PERSONAL TAX WRITE-OFF!! The powerful intersection between making smart financial strategies that provide personal benefits for long-term gains is one-of-a-kind.
So with that, let's unveil the details of exactly what I did! Think interior design enhancements, landscaping, and other valuable upgrades that I needed to do nonetheless but was able to do now - as a freaking tax write-off, whoop whoop!!!
The personal benefits of home improvements:
There’s nothing quite like walking into a space that feels refreshed + functional. Before 2024, I lived in my home ~70% furnished. Multiple rooms were left empty because I either didn't use them or was putting my money towards other investments and hadn't prioritized furnishings. However, I knew it was a goal of mine to create a home with updated interiors and finish landscaping the front yard. Creating a pleasant living environment would help me increase the value of my property (landscaping ROI) and improve the living experience (interior finishes). Heading into 2024, these became my goals and would be able to be brought to life for both myself and my summer renters.
Key upgrades like these can:
Boost the appeal of your rental space to attract high-quality tenants, increasing the rental income.
Increase the overall value of your home for long-term equity growth.
But the benefits didn’t stop there. These updates became part of my strategic plan to maximize tax savings while reinvesting in my own personal property.
How home updates can work as tax deductions:
You see...when you rent out part or all of your home, expenses related to the rental space can often be deducted from your taxes. In my case, the upgrades I made—such as interior design work and landscaping—qualify as deductions because they directly impact the portion of my home used by my renters.
And timing matters - by making these updates in the same year I started renting out my home, I could offset my rental income with significant deductions. Even though my expenses showed a loss to my net earnings, they were strategic investments that I planned on making with or without renters, and now I could offset the cost not only with rental income but also as a tax write-off!
Example: My expenses (mortgage + updates) without renters would have cost me approximately $64,000. However, by renting out my home, these improvement projects/expenses became a tax write-off because my home became a "business" generating income. So, instead of paying income taxes on the $32,315 I made on my "new rental property" (aka my home), I can show $29,234 in expenses, bringing down my net earnings to $3,081. I don't know about you, but I would much rather pay taxes on $3k vs. $30k, and I would love to have renters cover the cost of furnishing the remainder of my home + my landscaping costs.
Capitalizing on upgrades: What’s deductible?
Whether you're renting out a part of your home through a platform like Peerspace or renting out your entire home on Airbnb, there will be specific deduction details you will want to partner with a CPA on. Here are some potential deduction opportunities that you can chat through with the help of your Accountant:
Interior Design Updates: Renovations or furnishings that make your rental space more functional and attractive.
Landscaping Improvements: First impressions matter. Investing in your property’s exterior, such as landscaping and curb appeal, is as important as the interior.
General Repairs and Maintenance: Any work done to maintain or improve the rental portion of your home can typically be deducted. Think snow removal, painting repairs, etc.
Why does this matter to you?
If you’re a homeowner considering renting out part of your property, think strategically about the timing of your upgrades. Whether it’s new paint, updating the roof, or stylish interior finishes, aligning these improvements with the start of your rental period can have a huge impact on your financial picture for the year.
Don’t leave money on the table. Smart updates can benefit you personally while also working for your bottom line—ensure you’re tracking expenses and consulting with a professional to maximize deductions.
Ready to get started?
Strategic home updates are just one way to take control of your financial future. For more tips on leveraging your property to its fullest potential, check out my Investor Tax Playbook, which is packed with actionable strategies to help you save thousands while growing your wealth.
Here’s to making your home work for you!
JMF
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