Are you looking at possible tax payments for this year? If you made any improvements to your home, you may be able to lower your tax burden. A home improvement tax deduction can save you money, but you will need to track all your expenses for any home improvements. Not all home improvements can be deducted. If you put in central air or upgraded your roof, you might not be able to deduct the expenses during the year you spent the funds. However, you should still keep a record of these costs since it might be helpful when you sell.
Most funds you spend on fixing your home will fall into one of two categories. These are the expense of repairs or the expense of improvements. Any capital improvements will be included in your tax basis for the property. This happens when you sell. You will subtract these amounts from the profit total. Anything you do to increase the worth of your property configures it to different uses or prolongs its lifespan is considered a capital improvement.
There is no specific list of what qualifies for this deduction, however, if you’ve put in a new pool or installed a new roof, keep a record. These improvements don’t have to cost a lot and can be adding storm window or a new security system. Keep track of all costs. Repairs you make to your home, such as plumbing or painting a room are not part of this deduction. These are considered different than improvements.
Another possible tax benefit is using your money from your original mortgage to perform home improvements. If you take out extra money when you finance and use this money for home renovation or improvements, you can deduct the interest on your taxes as part of your mortgage interest deduction.
Another possible tax deduction for home improvement expenses is if they are medically necessary. Modifying a bathroom or installing a wheelchair ramp are home improvement expenses and they are tax deductible as medical expenses. These amounts must be reasonable and have a defined medical purpose. The improvements may not be for architectural or aesthetic reasons. Also of note, if these home improvements increase the worth of your home, they may not be claimed as medical expenses.
If you installed qualified energy saving or generating system, you may qualify for energy tax credits. There is a 30% federal tax credit for solar water heaters, geothermal heat pumps, small wind turbines, solar panels or fuel cells if they are placed in service for new construction or in an existing home. The solar credits are good through 2019, the rest through 2016, unless extended.
Except for the fuel cells, these improvements may be done to any residence you own, even a vacation home. Fuel cells must be used in your primary residence. There is no maximum for this credit and it includes installation and labor. The credit must be taken the year you made the improvements and must include a Manufacturer Certification Statement.
There are several home improvement tax deduction amounts that you may be able to claim. Be sure to keep track of expenses and have the proper documentation in case the IRS has questions.