Once you’ve purchased a security system, you’ve brought safety and protection to the home, and you can use your equipment to watch your dog from work or equip two-way talk to play pranks on your family. But do the perks extend all the way to a tax deduction?
Taxes aren’t exactly a man’s best friend, and some home repairs or installs actually save taxes whenever homeowners sell a house.
Home maintenance like landscaping or replacing pots and pans of course aren’t deductible, but are home improvements tax deductible?
Unfortunately, home security systems are not tax deductible. There is however one exception that allows homeowners to regain some of the cost — if the home is also used as a place for business.
Homes that use their space for official business purposes can’t recover all of their funds since the system isn’t fully deductible, but they will be able to regain some. But the system must be used to protect a business and not simply a home.
The reason why a newly installed security system can’t be deducted as a home improvement expense is because it does not comply with the IRS definition of permanent improvement.
In IRS publication 530, a permanent improvement increases the value of a property, adds to its life, or gives it a new and different use, which home security systems don’t do.
But if you have a home business, even if it’s only part time, you can write off a share of home expenses. For example, if the business is seven percent of the home space, you can write off seven percent of the mortgage interest, property tax, utilities and alarm costs.
But homeowners are only eligible for this deduction if their work space meets the requirements of the Internal Revenue Service.
This means the work space should be the center of the business, and solely used for business. It can’t be a person sitting on a couch in the living room and claiming that this setup is part of the business.
A good example is an area where you have meetings or take conference calls, store products, or it may even serve as a functioning daycare. “The principle place of business” can also mean somewhere in the home that is exclusively used for administrative and management activities for the business.
Another exception is if you are renting your house property. In this exception you can write off many parts of it as business expenses, like mortgage interest, property insurance, repairs and maintenance, but the IRS counts security systems as improvements instead of maintenance, so you won’t be able to recover the full costs for many years.
Taxes are rather tricky, and you’ll want to get everything just right. For further information, this resource at Love to Know is a great place to get a 360° look at everything that needs to be considered when figuring out your tax situation for security if you have a home business.
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