Home improvements can be costly. Adding a room, updating a kitchen, even turning an attic into a bedroom can run to $50,000 or more. So the question often comes up: can I deduct those expenses on my tax return?

The answer is no, not directly. But any capital improvements you make to your home are added to the purchase price and become part of your cost basis. When you eventually sell your home, the cost basis is deducted from the sale price to determine your capital gain (or loss) on the transaction. The cost basis might include any interest on a home equity loan that you took out to finance the home improvements. Any commission to a real estate broker is deducted from the sale price.

If you own and live in your home for at least two of the five years before the sale, you can exclude up to $250,000 from the gain ($500,000 if married and filing jointly).

For nearly 30 years, Mike Nickerson has owned and managed a small, full-service accounting practice in the Midcoast. He holds a bachelor's degree in accounting from University of Southern Main and a master's degree in financial planning from Bentley University.

He is a past board member and president of the Maine Society of Certified Public Accountants and currently serves on the Maine Board of Accountancy.

An aged rock musician, Nickerson now finds musical enjoyment playing upright and electric bass in a variety of bands spanning folk to jazz music genres. He and his wife have three grown children, and they enjoy their free time hiking, kayaking, golfing, bicycling and motorcycling.

http://www.nickersonpa.com/