Many homeowners are living in one of their biggest tax deductions without even knowing it. This is especially true of people who have added on to their house or done some remodeling project recently. There are actually lots of different ways you can use home improvements for tax deductions. Yes, you can often deduct the amount of interest you pay on your home loan or home equity loans, but there are also a multitude of home expenses and repairs you can use to lower your taxes if you meet certain criteria.
The additions you make to your house can qualify for income tax deductions or credits depending upon the size of the project, the reason for the home addition and your overall tax situation. Many house improvements and home remodeling projects can be counted towards reducing your income if you meet some certain requirements. Sometimes you need to operate a business and serve clients in a part of your house to be eligible for these credits, but there are other deductions you can use even if you do not work out of your home. Some people have heard about the new energy efficiency tax credits, but you might want to also consider some of the expenses of other different home improvement projects as well.
Tax deduction for landscaping – You probably won’t be able to subtract the entire amount, but rather, you would have to deduct part of the expense in proportion to how much your business and home share the same house. This is only one of the many possible deductions you can use if you really operate your business out of your home. In the past tax courts ruled that if you run your own business and meet customers regularly at your house you may be able to deduct some of your landscaping expenses as a business expense because it makes your business more attractive.
Pool tax deduction – Tax laws state that in some cases a part of the expenses to install a pool can be deducted from your taxable income if there is a valid health-related reason to have a pool. In one case a gentleman with low breathing capacity used a swimming pool to exercise and increase his lung strength. Since he used the pool more than his family he was allowed to deduct a portion of the expenses as a medical expense. These credits are important to keep in mind when you are applying for a loan to install a swimming pool because they can change how much you can afford. Other medical devices for the house such as ramps for wheelchairs might also qualify for a deduction. You should also know that the Internal Revenue Service considers a pool and a spa to be the same sort of medical device.
New roof tax deductions – Certain roof types are considered to be more energy efficient and have a greater positive impact on the environment by reducing energy consumption and lasting longer. There are actually a number of energy-saving home upgrades that can make you eligible for a tax deduction this year, but not all energy saving, or even all Energy Star, products qualify. Remember that the roofing materials themselves are approved for the tax credit but the labor needed to install them is not eligible.
To be sure that you are counting everything you can, you should take copious notes, take a lot of photos and obviously organize all your receipts for every possible home improvement expense. If you are planning on finishing some home projects this year, you should really look into the possible tax savings that might be available! Not all home improvements qualify for tax credits, but with a little planning you can definitely save some cash on your federal taxes and upgrade your home at the same time. The rules for income taxes are always changing, so it might be beneficial to speak with a qualified tax professional about your home improvements to find out of you qualify for some of these special credits.
These are just some of the possible ways your home improvement expenses can save you money on your income taxes. If you really want all the details, then be sure to read our full guide to tax deductions for home improvements.