What if someone told you that you could save money by renovating your home? Whatever you are thinking is generally what most people think. A home renovation costs a lot; how could it ever save you anything? Renovating a home is not generally something that can be deducted from your taxes, but there are a couple ways that you can use this to minimize your taxes, and who doesn’t love a good tax break? If you have been wanting to renovate your home without breaking the bank, these home improvements might work for you.
Read on to learn about the many ways you can use home renovations for federal tax reductions. These include both tax reductions and tax credits for renovations that are made to your home at the time of purchase or once the renovation is complete.
Using Your Mortgage for Renovations
If you are buying a house with a mortgage, you can actually use that to make the home improvements once it is purchased. To be clear, this is only at the time of purchase, so if you have had a mortgage for a couple years, this probably won’t work in your favor.
Sometimes, the mortgage has additional money to make renovations. At this point your attainment cost for the home includes this amount. From there, you are allowed to deduct the interest on that amount from your income as part of your mortgage deduction.
For new home buyers that automatically lose interest in a prospect when realizing it needs some renovating… you might want to change your mind. You can have the home of your dreams without it breaking your bank!
Renovations for Medical Purposes
If you or your spouse need to make changes in your home to make it more comfortable as you age or due to a condition, this can be deducted from your income as medical expenses as long as they are medically necessary. Some improvements that can be made include:
· Building entrance and exit ramps that are wheelchair accessible
· Widening hallways and doorways
· Lowering cabinets in bathrooms and kitchens to enhance accessibility
· Adding lifts from floor to floor
· Installing support bars in bathrooms
· Modifying or installing fire alarms, smoke detectors and other warning systems
· Modifying hardware on doors
· Moving or modifying electrical outlets
If you plan to stay in your home as you age, we suggest talking to your doctor to discuss any improvements that may make you more comfortable in your own space. You can read more about medical home improvements here.
Home Office Improvements
There have been many changes to home office tax deductions over the years. We are here to clear the air and tell you that home office deductions have not completely gone off the radar.
It used to be that any person who had a designated space in their home for business purposes qualified for a tax reduction, but as of 2018, this is no longer the case.
Your home office must be your main office. This means that you work out of your home office far more often than you do anywhere else. If you work from home four days out of the week and only go into the business office once, this tax deduction is for you.
If you regularly meet with clients out of your home office, whether it’s included directly in your home or is a separate part of your property, you may also qualify for this deduction.
If you do qualify, tax deductible home improvements include:
· Repairs that need to be made directly to your office –fully deductible
· Improvements directly made to your office – fully deductible
· Repairs made to other parts of the home – partially deductible
· Some improvements that need to be made to other parts of the home –partially deductible
Tax Credits for Energy Conservation
A lot of people are hesitant to install energy generating systems in their house because of the cost but doing so could actually possibly save you money. One of the greatest ways to lower your taxes is by taking advantage of energy tax credits through installing those energy generating systems you have always wanted.
Solar power systems in homes create clean, pure energy from the sun. Installing these systems can help to combat greenhouse gas emissions and reduce collective dependence on fossil fuel. Additionally, they keep your home at a comfortable temperature all year long.
According to Turbo Tax, you can get a federal tax credit of 30% of the cost of qualifying geothermal heat pumps, solar water heaters, solar panels, small wind turbines, or fuel cells placed in service for an existing or new construction home.
If you are interested in energy generation, keep in mind that it may seem like a lot of money up front, but there is a good chance you will be refunded, and you will also continually save money on energy bills. If you ask me, that’s too good of an opportunity to pass up. You must also know that in order to get the tax credit, you need to take it the same year the item was placed in service for your home.
Before you consider moving into a new home, talk with an expert. Many people are under the impression that home renovations cost too much money and require too much time and effort. They believe it would be easier to buy a brand new place. However, this is not always the case, and you can have a newly renovated, energy efficient home for a lot less money than you think.
At Legacy Renovations, we are dedicated to providing our clients with the best possible experience when renovating their home. Our seven step Design and Build process ensures you have a truly unforgettable remodeling experience.
Interested in doing a renovation on your home? Contact us at Legacy Renovations to learn more about home renovations that can save you money with a federal tax deduction.
