If you had made any improvements to your home this year, this may add some highly desired deductions to your tax return. A home improvement tax deduction will require to diligently track your expenses, but it will be worth it if you want to save a significant amount of money.
Examples may vary from installing central air to repairing your roof from hail damage. Of course, the rules may change and not all types of expenses are covered by a tax write-off.
Investing in Renewable Energy
The tax law pushed by Republicans in 2018 fortunately had the benefit of sparing the renewable energy industry in the form of tax write-offs. The solar panel tax credit benefits homeowners wanting to install new panels by offering a 30-percent savings on the amount spent. This also applies to commercial applications of renewable energy.
As each year goes on, the tax credit will dwindle down to 10% in 2022. This provides an incentive for individuals to install solar panels ASAP as the full 30-percent discount still applies in 2019. In 2020, a whopping 26% may still be saved.
Medically-Urgent Home Improvement
If you need to make home renovations due to medically defined purposes, you may deduct it as medical expenses. This only applies if such upgrades are not to increase the value of the home or for aesthetic purposes. Bathroom handles, wheelchair ramps or other functional installments are what this type of deduction is intended for.
Using Money From Your Mortgage For Home Improvement
A possible tax benefit is using your money from your original mortgage to perform home improvements. If you take out extra money when you finacne your home and use this money for renovation or, you can deduct the interest on your taxes as part of your mortgage interest deduction.
A Home Office if you Work At Home
If you have home improvement costs for the purpost of creating a home office, you may have a deduction of up to 100%. This only applies for a legally registered business with your home as the address. For upgrades that apply to other areas of the home, like a new central air system, a partial deduction may apply.
Renting Our a Room
If you rent out one of your rooms on a short-term (think AirBnB) or long-term basis, your home improvement costs can be considered a rental expense. Your deductions will be made to the taxes you pay on rental income. Home improvement deductions may apply partially or in its entirety depending if the upgrade directly affects the part of the property being rented.
You will need to carefully determine if your home improvement deductions fit the current guidelines set by the IRS or your local tax authorities. It may be a good idea to utilize tax preparation software or services to make sure that it is utilized correctly.