In most cases, the definition of home improvement refers to any projects that improve the structure of a home or outdoor building
This includes but is not limited to gardens, lawns, garages, gazebos, pools, etc. Pretty much anything that will increase the value of your home. Sometimes home improvements will include repairs, maintenance, and servicing.
What falls under Home Improvement?
Anytime you maintain or upgrade your property it is home improvement.
This includes upkeep and modifications.
So for example, painting, resurfacing of your pavement and driveway, installations of any kind, decks, porches, additions, and so on.
However, here is where it gets tricky.
Not all states have the same regulations.
If you hire someone to paint the interior or exterior of your home for instance, depending on the state, they may or may not be eligible to charge you a sales tax.
The percentage depends on the state as well.
In New York state you will have to pay the contractor a sales tax unless you have documentation that the project is a capital improvement.
You will then be exempt from any sales tax besides materials.
How to get a capital improvement document?
They state “Receiving Form ST-124 relieves the contractor from liability for any tax due on the work. The contractor should keep this exemption certificate in his or her records to show why no sales tax was collected on the work“
All records must be kept for a minimum of three years.
Is Material Cost Tax-Exempt For Home Improvements?
Generally, the material cost is not tax-exempt.
For example, if you have a certificate of capital home improvement that means your project is the definition of home improvement.
In this case, you will not have to pay sales tax for labor by the contractor you hire.
However, if the material cost is $1000 and the labor is $3000 then your bill in NYS would look like the following example:
Sales tax (8%): $80
For Labor and materials: Materials (including sales tax and mark up)
What constitutes a renovation?
The definition of home improvement includes renovation, remodeling, upgrade, and so on.
Anytime you add, remove, change, upgrade, downgrade or improve your property it can be considered as such.
Other home improvement synonyms include:
Disclaimer: I am not a certified CPA and each state has its own definition of home improvement.
Therefore you will have to do your own research which can be as simple as googling “the definition of home improvement” in your state.
This is just a guide that will help you determine where and how to research.
If you are planning a home improvement make sure it is considered a capital improvement by filing with the department of taxation and finance. That will exempt you from having to pay labor tax in most states. However, always check with your state and CPA first.
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