Did you know that home improvements are eligible for reductions on your federal taxes? Due to current market conditions and slowing real estate markets, many homeowners are opting for the improvement of the existing home rather than for a new home. These home improvements qualify the most as a deduction on your taxes and can be used to reduce the amount you owe on your annual taxes.
Home Improvements Eligible for Tax Deductions
Any home improvement performed for medical reasons, such as elevators, ramps, raised sinks, and door widening, may be eligible to a tax deduction. With proper documentation of the costs involved, you can recover a percentage of your renovation costs, but without the received receipts, you will have nothing to make a claim with.
Improvements to your home in terms of energy savings may qualify for tax credits and rebates from the federal, state, and local governments. local governments. In some states, you can get up to 25% of your total cost for the installation of energy efficient heating and cooling appliances. Home energy upgrades are also beneficial to reduce your electricity bills and additional savings over time. Energy-related improvements can add significant value to a home and increase resale value up to 15% or more in certain areas where energy consumption is more expensive.
What home improvements do not allow to deduct taxes?
As with all things government, there are a number of requirements and limitations. An example is the difference between a home repair and a home improvement. Home repairs can not usually be used as tax deductions and the definition of repairs versus improvement has allowed more than one homeowner to be vigilant in the past. An example of home repair can be something like replacing a faulty roof or a broken water heater. An improvement would be something not necessary but offers long-term value.
Be careful and do not get carried away
The Internal Revenue Service has very strict requirements and standards on what can or can not be claimed for tax deductions. Make sure to check with your tax accountant or financial advisor what you can and can not do. We are general contractors in Florida and not tax professionals, but in our experience, many homeowners will neglect to check what they can or can not claim on their taxes and they will often miss the opportunity to maximize their investment.
There are limits on the amount you can claim and the cost involved. For example, building a wheelchair ramp with a covered walkway may seem nice, but in most cases, tax breaks will be on the ramp alone and not on the roof system. This is not a necessary element for improvement.
Be aware of the many pitfalls and do your research before making decisions related to your finances. Tax deductions for improvements are a great way to reduce your total tax debt as long as they are properly made.