When does home remodeling make financial sense?

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Here are a few considerations to weigh before you decide to remodel:

Wishes vs. Needs

How necessary are the improvements you want? The days when many improvements paid for themselves in increased home value are over for now, especially such strictly cosmetic upgrades as new kitchen cabinets or a bathroom skylight. That doesn’t mean certain projects aren’t worthwhile. For instance:

  • Repairing a leaky roof or faulty plumbing might spare you from water or mold damage.
  • Installing attic and wall insulation and energy-efficient windows or replacing older appliances and light fixtures will lower utility bills and may be tax-deductible (visit www.energystar.gov for information on tax credits and rebates).
  • The IRS allows tax deductions for certain home improvements to accommodate medical conditions or disabilities with a doctor’s recommendation. The rules are complex, so read IRS Publication 502 at www.irs.gov and consult a tax advisor before proceeding.

Budgeting

Gather cost estimates for each job or item and create a chart with columns for high-, medium- and low-cost options. Don’t forget supplies for do-it-yourself projects and always add an extra 20 percent or more for unexpected expenses. If contracted labor is involved, gather three estimates and carefully check references and business licenses. Also, ask about discounts for grouping multiple projects together.