Tax Deduction Consulting: Home Improvements Moundsville WV
Horizon Financial Group
Education: Ohio University, BBA FinanceCollege for Financial Planning's CFP Certification Professional Education Program
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Vealey Financial Services
Years of Experience: 43
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Tax Deduction Consulting: Home Improvements
Tax Deductions for Home Improvements
It is possible to make improvements to your home and save some money at tax time at the same time. Tax deductions for home improvements follow some definite guidelines.
The most important thing to understand when considering tax deductions for home improvements is the difference between an improvement and a repair. Basically, an improvement adds to the value of the home. This can be adding a swimming pool, enlarging or adding rooms, or even fencing the backyard. A repair does not add to the value of the home, it simply prevents the value from dropping. A repair to a damaged roof or the replacement of leaking plumbing fixtures is a repair.
When the improvements are also used to conserve energy, there may be additional credits offered by the IRS. These conservation based credits vary from year to year, but the trend has been to increase them as the need to conserve energy becomes more of a National priority. It is always wise to look into the tax credits offered for environmentally friendly items, such as solar water heaters, when planning an improvement. Even some repairs can be converted to tax deductions if the repair qualifies for an energy credit.
A home improvement for medical purposes is a separate area that could have tax impact. If you add a pool, or make a home more handicapped friendly, the cost of the improvement could be considered as a medical deduction. In order to do this, you must have a written statement from a doctor that the improvement was recommended for medical purposes. You also need to realize that the medical deduction will only be valid for the amount that exceeds the increased value of the home as a result of the improvement. It should be remembered that medical expenses must exceed 7.5% of adjusted gross income in order to be claimed as a deduction.
Another way that home improvements might be helpful as tax deductions is to borrow the money for the improvement. This allows the interest on ...