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Your answer to the second question, expense or investment, depends on what you’re doing with the basement. If you’re adding a family room or a home theater it’s an expense and no financial payback is expected. However, if you’re installing a home office for your or production space for your small home-based business it’s an investment. It’s also an investment if you’re installing an income-producing apartment. Maybe you’ll be renting it out to strangers or maybe elderly parents moving in to the basement apartment have agreed to help out with construction costs or pay a small rental fee. In any case, it’s an investment. As an investment, all or part of your basement can be treated as income-producing property. That is, the expenses might be written off your income tax obligation or qualify for a higher mortgage amount because of the income that it will bring in. If you’re getting into areas of taxation, spend a few bucks to talk with a tax accountant with small business or real estate investment experience.
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