Planning on changing your home for the better? Whether you’re turning your garage into a bedroom or retiling your master shower, you’re going to want to know the difference between a remodel and renovation. 

These terms are often used interchangeably, but they are two very different ways of upgrading your home—and one is usually much more expensive and time-consuming than the other.  

Understanding what makes remodeling and renovation different will make it easier to discuss your plans accurately with contractors, and it will help you better understand what it will take to make the changes you want. You may even change your mind about the home improvements you want to make as one often has a better return on investment (ROI) than the other. 

What Is Renovation?

In the simplest terms, a renovation means restoring something to its original condition or making it look better. The dictionary defines renovate in two ways:

  1. To restore
  2. To refresh

But what does renovating a house mean?

When it comes to your home, renovating means repairing structures to their prior condition or updating features of a room to look better. This includes cosmetic changes like painting the kitchen or adding a new light fixture to your entryway. 

During a renovation, the purpose of the space remains the same. 

Thus, bigger changes can also count as a renovation—like repairing a wall with severe water damage, so long as you restore the wall to its original condition. 

Homeowners typically renovate their home to give it a personalized touch or increase the home’s value. 

Examples of home renovations include:

  • Painting
  • Replacing windows 
  • Installing light fixtures
  • Refacing cabinets
  • Installing new countertops
  • Installing new floors
  • Getting new appliances 
  • Switching to energy-efficient systems
  • Restoring a roof to its original condition
  • Replacing a shower without changing any plumbing or electrical

⇨ Renovating vs Remodeling: Renovating is better if you’re just looking for a new look or to improve the condition of your home. 

What Is Remodeling?

To remodel means to make something entirely new, and it requires more significant changes than your typical renovation. The dictionary defines remodel like so:

“To change the structure and form of something.”

What does this look like when it comes to your house?

Remodeling is more than updating a space to look better; it’s about changing the layout or structure of a room in a way that repurposes the space, and it often requires construction. 

Think about reshaping your space, like switching to an open-concept layout or moving a wall to make your bedroom bigger. A remodel can even look like rearranging the kitchen so that your cabinets, stove, and sink are all in different places. 

Some remodels are simpler, such as turning a guest bedroom into a home gym. While this doesn’t require a plumbing change or knocking walls down, it gives the room a new purpose.  

Homeowners usually remodel their homes to make them more comfortable or upgrade their lifestyle, but some remodels can increase the home’s value. 

Examples of remodeling include:

  • Making space by removing or moving walls
  • Raising ceilings
  • Combining two rooms 
  • Splitting a room in two
  • Changing one room into another
  • Functionality changes, like adding washer and dryer hookups to a bathroom

⇨ Remodeling vs Renovation: Remodeling is better if you need more space or new functionality. 

Do You Need a Permit to Change Your Home?

Most of the time, home renovations don’t require a permit, but you might need one for a large enough fix, like repairing your roof. On the other hand, remodels almost always require a permit because they alter the structure, square footage, and systems of your home.

Local communities have zoning laws and building codes in place, so you need a permit to signify that your remodel falls within their guidelines. 

Unfortunately, permits come with their own cost, averaging between $450-2,300. Of course, the cost of your permit(s) will depend on where you live and how big of changes you’re making. 

If you own a historic home, you’ll want to make sure that you’re allowed to remodel it before trying for a permit. Certain historic homes aren’t allowed to be remodeled because they’re considered an important part of history or are deemed “architecturally significant” by the National Register of Historic Places.

Does Renovating or Remodeling Cost More?

Remodeling almost always costs more than renovating because it involves more extensive changes. A renovation is easier to keep on a budget since it requires more surface-level cosmetic changes. 

Cost considerations when renovating or remodeling a room include:

  • Permits
  • Labor and consulting fees
  • Materials (drywall, flooring, appliances)
  • Size of the space being renovated or remodeled
  • The age and condition of your home

All of these considerations are typically more expensive for a remodel than a renovation. For instance, a remodel often requires more contractors and subcontractors, including designers, architects, plumbers, electricians, and HVAC technicians. While you can DIY simple renovations like painting, you should hire professionals to do a remodel safely and correctly.

Does a Renovation or Remodel Have Better ROI?

On average, renovations have a better return on investment than remodels. This is for two reasons:

  1. Updating your home often benefits buyers more than a remodel (e.g., a new roof saves them money and a larger bedroom doesn’t).
  1. Renovations are cheaper, so your investment is easier to make up. 

That said, a remodel that fixes poor home design choices, like having to walk through a bathroom to get to a bedroom, can make it easier to sell your home. The same goes for system problems like bad plumbing. Design and system problems are more common in older homes built with outdated codes.

If you’re hoping to compare the ROI of specific projects, Remodeling Magazine provides a Cost vs. Value analysis of common home improvement projects, including their ROIs. They update these statistics annually.

Are Home Improvements Tax Deductible?

According to TurboTax, home repairs don’t usually qualify for tax deductions. That said, certain home improvements can lower your taxes in the form of tax credits or by being deducted from your income. Examples include:

  • Medically necessary changes, like an accessibility ramp, can be deducted from your income as medical expenses.
  • Adding certain energy-efficient upgrades can qualify for tax credits. 

Another exception to the rule applies when you sell your home. If you gain enough profit when selling your home, you are taxed on that profit. You calculate your profit by taking your sales price and subtracting how much you paid for the house. This is where your home improvements come in. 

Money spent on certain capital improvements, like a new roof or an addition to the home, can count towards what you paid for the house and decrease your taxable profit.  

For specific information on how your home improvements may or may not impact your taxes, we recommend consulting with a tax advisor. 

Renovate vs Remodel: Which Is Right for You?

You may already know what changes you want to make to your home, but if you’re deciding between a renovation vs remodel, their differences may help you choose. Your budget, the amount of time you have, and what you ultimately want from your home are important factors to consider. 

Here is a recap of the main differences between a renovation and remodel. 

– Repairs or cosmetic changes
– Less expensive on average
– Requires less labor 
– Can be done faster
– Less likely to require a permit
– Remaking or reshaping a room
– More expensive on average
– Requires more labor
– Usually takes longer
– Almost always requires a permit
– Adds purpose or functionality

Another important consideration is how long you plan to stay in your home. If you’re looking to spend the next 30 years of your life somewhere, the cost of a remodel might be worth it to you. If you plan to sell in the next year, most renovations will be cheaper, faster, and offer a better ROI.

Whether you choose to remodel or renovate, remember to update your home insurance to match. In case of an emergency, it’s crucial that your home insurance covers the replacement cost of your upgraded home.