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Does making home improvements increase one's tax liability?

If one makes home improvements (ex. install new kitchen cabinets, new flooring, etc.) will those improvements increase one's yearly tax liability?

No; If the improvements are new energy efficient appliances or windows there are tax credits available that will reduce your liability.

You should keep track of the costs of improvements made, as they will be added to the basis of your property. When you sell the property, this will reduce the gain on the sale. However, there is an exclusion of the first $250k ($500k if married filing jointly) gain on the sale of a principal residence, so it is likely when it is all said and done these improvements may not save you any tax.

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