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Is Your Fence Installation Tax Deductible?

July 23, 2018

One of the potential benefits of a new fence is the ability to save money on your taxes. However, it’s not the same for everyone. Depending on your situation, you’ll benefit in a different way.

Personal

If you get a new fence installed at your primary residence, you won’t be able to deduct the cost on your income taxes for that year. But that doesn’t mean you can’t benefit in another way.

By installing a new fence, you’d increase the “tax basis” of your property. Your tax basis includes the amount you’ve invested in your property over time. This means, if you were to sell that property, you’d be able to deduct the cost of your home improvements in order to lower the amount that is subject to tax after the sale, as your total profit would be lower. This also applies to other major home improvement projects.

While this isn’t a benefit you can immediately take advantage of, it’ll help you save money in the long run.

Business

Do you own a business and plan on installing a new fence on the property? Then you’ll most likely be able to write off the cost of your new fence as a business expense. Like any business expense, it must be ordinary and necessary to your business in order to be written off.

An old fence could be a potential safety hazard, so by getting a new fence you’ll improve the appearance of your business as well as the safety of your customers.

These benefits would also apply to those who run a business out of their primary residence. In this case, you wouldn’t be able to write off the entire expense. You would determine the percentage of the residence that you use for business purposes, and then take that percentage of the cost of the fence when writing off the expense.

Rentals

If you rent out one of your properties and invest in a new home improvement, you’ll be able to write off those expenses as well. Similar to the business expenses referenced above, improving your rental properties would be something that is necessary and ordinary to keep your properties in good shape and your tenants happy.

This can also apply to those who rent out a portion of their home. Once again, you’d calculate the percentage of your home that you rent out, and then use that percentage for the amount of home improvement expenses you’d potentially be able to write off.

We hope you have a better understanding of how a new fence could end up helping you financially. As always, be sure to consult a tax professional before writing off any home improvement expense on your own. You can also read more about deducting business expenses on the IRS’s website here.

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