Home improvement is essential at one time or the other. You can renovate your home just to make it look more attractive. Also, you can improve your home so as to increase its value, and sell it. Do you know that some home improvements are tax deductible, and can help lower your total tax bill when tax season comes? Here are the home improvements as well as other strategies that can help lower your tax bill for the year.
Home improvements for medical purposes
You can improve your home for different reasons. You can renovate your home and some of the improvements you make technically count as medical expenses. For instance, you can install entrance ramps, improve your bathroom, widen your doors, create special doors or windows, or add handrails. These improvements can be considered medically essential and therefore, can qualify as tax deductible for home improvement through medical expenses deductions. The renovations or additions must be considered medically reasonable, and must have a practical use.
Energy generating modifications
You can also add energy generating systems to your home as part of your home improvement. This move is not only cost effective, environmentally friendly, but also can help you enjoy a reduced tax bill. When you install solar panels, geothermal heat pumps, wind turbines and other clean energy systems, you can get up to 30% energy tax credit. The credit applies to both installation as well as labor costs.
Other smart ways
Exclusion on the sale of your home
When you sell your home, you need to pay capital gains tax. However, if the capital gain doesn’t exceed $250,000 for a single taxpayer and $500,000 for a married couple filing jointly, you do not have to pay capital gains tax after selling your home. The reason behind this is that the cost of renovation will reduce the profit you have to declare after selling your home. In other words, if you had renovated the home, the cost of your renovations and home sale exclusion will significantly reduce the amount of tax you pay.
Use your mortgage for home improvement
Sometimes a mortgage can include money for any changes you need to make in your new home before you buy or settle in. For that reason, you should take advantage of that to make the changes you need when purchasing a home. The cost of renovation or improvement is likely to be added to the price you paid for the home. As a result, you can claim a deduction via mortgage interest deduction.
When you improve your home for any reason, you can be entitled to different tax deductions for homes. The tax credits and deductions range from energy tax credit to medical expenses deductions. To help you claim a home improvement tax credit you are qualified for in order to lower your taxes, use H&R Block. You just need to answer a few questions, and leave the rest to the online tax software. The online tax filing process is simple, quick and convenient.