Earning Extra Credit On Your Home

Tax season is here, and as a homeowner you’ll be checking off the list of deductions from paid interest to property taxes, but what about that new water heater you installed? Depending on the home improvement project, or modification, you may be eligible for a tax credit to start a vacation fund, or purchase that sofa set you’ve been eyeing.

Cosmetic Or Credit?
While applying a fresh coat of paint, or installing granite counter tops can boost the resale value of your home, they won’t qualify as a write off. According to Turbo Tax, improvements that change the aesthetic of the home like putting in a pool contribute to the structural appeal only, but can’t be counted as a deduction. On the flip side, making modifications to improve a home’s accessibility could pay off. Aging in place is becoming a popular trend with baby boomers, and renovations such as zero threshold showers, or opening up entryways to accommodate a wheelchair can be considered deductible medical expenses. Before you embark on a big change, it’s a good idea to consult with a financial advisor to help get the most out of your investment.

Energy Savers
These days we’re all about going green especially when it comes to our homes. From rainwater irrigation to sustainably sourced flooring, eco-friendly innovations are becoming the new norm. The Department of Energy lists a variety of tax eligible equipment, along with the maximum “cap” for each upgrade. Major improvements that increase energy efficiency including the installation of cooling, and heating systems, insulated windows, and doors, and solar paneling can be reported for a credit. If you invested in a new refrigerator or high efficiency washing machine, you might be in luck depending on when you bought it. Currently, Energy Star appliances purchased before 2017 may still qualify as tax deductible.

Landlord Perks
If you own a rental home, you have the benefit of deducting various expenses including utility and repair costs, along with property taxes, and mortgage interest. According to the IRS, costs incurred by the tenant, as well as general maintenance expenses may also be included as taxable income. Managing rental properties can be a lucrative investment especially when it comes time to file, however it’s important to keep detailed records, and receipts of every penny you spend to avoid having to back track, or pay any penalties.

If you enjoyed this post, please consider leaving a comment or subscribing to the RSS feed to have future articles delivered to your feed reader.