Home Improvements and Tax: What You Should Know!February 27, 2023
Some home improvements are tax deductible, others are not. To help you understand more, learn more about home improvements and taxes here.
The 2021 tax season is just around the corner. For that reason, you need to get ready for the tax season to ensure you have an easy time. More to that, you need to know the tax deductions and credits you qualify for the tax year. Many taxpayers forget or are not even aware of home improvement tax deductions and credits. To help you understand this and much more, here is the information you need to know about home improvements and your taxes.
Home improvements Tax Deductions and Credits
You can make improvements in your home for different reasons. You can make the upgrades for architectural and aesthetic purposes. Also, you can make upgrades for medical reasons or energy efficiency related proposes. Are home improvements tax deductible? Not all home upgrades are tax deductible. And when we talk of home upgrades we talk of the total cost of the improvements, including cost of labor.
One thing you need to understand is that all home improvements for architectural and a esthetic purposes don’t qualify for the deductions. Therefore, if you renovated your home, installed new doors, windows or even changed roofing, just to make your home look better, you will not be eligible for home improvement tax deductions.
However, if you made improvements in your home for medical purposes, you can claim the deductions through the medical expense’s deductions. The upgrades must be considered genuine, and must be to accommodate a medical condition or disability. These upgrades can include but not limited to door widening to accommodate wheelchairs, lower cabinets, add handrails and more. In addition, if you make energy efficient improvements in your home, you can claim energy tax credit up to 30% of the total cost of installation. These includes solar panels, geothermal heat pumps, solar-powered water heaters, wind turbines, among others. This tax credit can significantly reduce your tax bill.
What About Tax Credits for New Home Buyers?
When you buy a new home, you can qualify for incentives for mortgage credits. Depending on your filing situation, you can claim new home buyers tax credit for costs associated with taxes, insurance and mortgage interest. Therefore, when buying a new home, make sure you factor in home improvements you intend to do in the mortgage plan. This will help you adjust your mortgage interest deductions and that will be an advantage for you when filing your taxes. More to that, you need to be aware of the new standard deductions for new home buyers. For married couples, the amount is $24,000, while for single filers, it’s $12,000.
If you want to pay a less tax bill, you need to claim the home improvement deductions and credits you qualify for. You need to get your facts right, and must provide Manufacturer Certification Statements to support your claim. Then prepare your taxes the right way to avoid errors. The H&R Block is here to help you prepare and file your taxes the smart way. With this online tax filing software, you will take advantage of home improvements tax deductions and credits you qualify for. That way, you will have a less tax bill come tax time.