When it comes to renovation loans in Massachusetts, “rehabbers” can use a private loan as a lending tool for financing when they plan on holding the property until the rehab work has been completed or when the property goes to sale. Once a property has been renovated and sold for a profit, the loan is paid off in full or gradually, depending on the agreed terms.

While renovation loans in Massachusetts can also be a valuable tax benefit, like most things which are subject to government rules and regulations, writing-off renovation loans in Massachusetts can get a bit tricky.

Although the IRS guidelines are basic black and white, there’s also a fair amount of gray. Things have changed. In the past, home equity loan interest was generally tax deductible no matter how the borrowed money was used—whether it was a fix-up, paying off debt or other household reasons.

Since the Tax Cuts and Jobs Act of 2017 and the IRS Home Mortgage-Interest Deduction, homeowners can only deduct interest from home equity and renovation loans in Massachusetts —if the loans are being used to fund only certain types of projects.

While the wording can get complicated, it all comes down to whether the renovation loan in Massachusetts was used for a repair or a home improvement. For tax purposes, there is a big difference.

Several types of home improvement projects can be eligible for a tax write-off, but it ultimately comes down to what kind of remodel you’re completing and whether it’s classified—as a repair or an improvement.

A home repair is any work done to fix and restore a home to its original state. Like replacing broken window panes, fixing a leaking faucet, fixing a hole in the carpet, replacing broken hardware, or replacing a few broken roof shingles.

An IRS-approved renovation loan in Massachusetts is for any home improvement that increases the value of a home. Like adding a new driveway, a new roof, insulation in the attic, a new septic system, or built-in appliances. Other allowable improvements include adding a new garage door, fence, swimming pool, porch, deck, siding and window replacement, kitchen and bath remodel, new wood flooring, entry door replacement, manufactured stone veneer, basement finishing, and an addition of a master suite.

According to the IRS, qualifying as an improvement, the work must add value to the home, adapt it to new uses, or prolong its life. If repair-type work is part of the overall improvement, it may also be included.