It is that time of year again, but it’s just possible that if you have carried out certain home improvements over the past tax year, you may be able to deduct the expenses or even get a tax credit.
This means it could be possible to significantly lower the amount owed to the IRS or perhaps to even eliminate it completely. If you have plans to renovate this year, or are thinking about buying a home that requires significant improvements then it could be worth considering how remodeling could affect your next tax bill.
An article in realtor.com has outlined four large renovations that could reduce your tax bill. The first of these is the Residential Energy Efficient Property Credit where it is possible to receive a tax credit for any alternative energy equipment that you have installed in your home. With a tax credit the amount is deducted from the amount you owe and it’s possible to receive credit for up to 30% of the purchase and installation cost for alternative energy equipment. This is defined as being geothermal heat pumps, solar electric systems, wind turbines or solar water heaters. These types of home improvements are expensive, but the tax benefits may make them worthwhile.
Home improvements paid for through your mortgage may also be tax deductible which could be beneficial if you take out a larger mortgage to renovate or if you take out home improvement loans or a home equity line of credit. The benefit isn’t huge but any saving is worth having.
If you need to make home improvements through medical necessity for yourself or a family member, then these can be deducted from your income. There are a number of potential tax savings that can be made which include lowering cabinets, widening doorways and installing wheelchair ramps.
Other tax savings can be made through installing energy efficient improvements that can be relatively simple and cost-effective. Just swapping out old and inefficient skylights, doors or windows for newer more energy efficient models can help you to qualify for a credit of up to $500.
Experts feel that it is easy for most homeowners to qualify for some of these tax benefits simply through making the kind of improvements that are normally required during the upkeep of a home. However the article does point out that it’s important to pay attention to the quality of your new installations that must be Energy Star rated and they have to be installed in your primary residence.
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