Home improvement is an industry that includes the retail sale of building materials, appliances and decor for improving a home. The industry also includes the hiring of contractors, tradespeople and others who perform home improvement work or renovation. Home improvement has enjoyed excellent growth results in recent years. However, the COVID-19 pandemic and a rise in inflation are expected to lower these results in 2023.
A home improvement is any alteration, remodel, addition, upgrade, or improvement of the interior or exterior of a residential building or other noncommercial structure. This can include remodeling, repairing, restoring, modifying, enhancing, or otherwise improving an existing home or building; installing insulation; converting a commercial building to a residential use; or adding solar energy systems.
Most homeowners consider a variety of factors when choosing a contractor to perform home improvements, such as price, experience and reputation. It is important to keep in mind that the quality of the finished product will impact your resale value. Therefore, it is best to choose a high-quality contractor with a track record of completed projects on time and within budget.
Many homeowners renovate their homes based on their return on investment (ROI). Unfortunately, the ROI is not always what it seems. Homeowners often spend money on upgrades that do not provide an immediate return and may even hurt resale value. For example, upgrading to marble flooring is a luxury that not all buyers will be interested in paying for and can decrease your ROI. A better option is to opt for quality midrange upgrades that will appeal to a wide range of buyers.
Another factor that impacts ROI is whether the work is a capital improvement or an ordinary repair. Capital improvements add value to the property and prolong its usefulness. Usually, the cost of these types of improvements can be added to the cost basis of the property and subtracted from the sales price at the time of sale to determine your profit. Ordinary repairs, on the other hand, do not increase the value of the property and are typically not tax deductible.
Some projects do not improve resale value, but are still worth doing for your own comfort and enjoyment of the home. For example, replacing worn doorknobs, cleaning rain gutters and repairing sidewalk cracks are inexpensive, but will make your house more attractive and help protect its value. Some necessary improvements, such as fixing a roof leak or updating electrical systems, are also important for safety and security reasons. In addition, certain energy-saving home improvements may yield tax credits at the time of installation. It is advisable to consult an accountant or other qualified professional regarding the tax ramifications of specific home improvements.