Some home improvements may be eligible for tax deductions or credits given they meet certain criteria. A tax deduction reduces the cost of salary that the Internal Revenue Service deems taxable while a tax credit lowers the amount of your taxes.
In this post, your local home remodeling expert, Handyman Connection® of Jeffersonville discusses what you need to know about tax-deductible home improvements.
Home Repairs Vs. Home Improvements
The first thing that homeowners should understand is the difference between home repairs and home improvements.
Home repairs include the parts of your house that need fixing like a faulty electrical system or plumbing and they don’t qualify for tax deductions. However, if it was discovered during the process that something needs to be repaired, they can be considered as part of the home improvement cost.
IRS Criteria for Home Improvement Tax Deductions
1. Energy-Efficient Upgrades
Energy-efficient upgrades may include window replacements, new doors, insulation, solar energy, air conditioners and furnaces. They are eligible for a limited amount of tax deduction that changes every year, so it’s best to consult with a tax advisor before starting with your project.
The IRS allows tax deductions for these products because they decrease the country’s total amount of energy consumption. Take note that not all energy-efficient upgrades qualify for tax deductions, like installing solar water heaters for swimming pools.
2. Medical Home Improvements
If your home improvements are done for medical purposes and your doctor gave a statement that these upgrades are necessary for your health, then these can be considered for a tax deduction. These improvements may include a wheelchair ramp, mold removal and allergy filtration systems. You can deduct medical-related home improvements that cost over 7.5% of your adjusted gross income.
3. Equity Line of Credit to Pay for the Improvements
A home equity line of credit (HELOC) can be used to cover significant expenses like home renovations and medical bills. It’s a second mortgage that operates similar to a credit card. If you’re using this mode of payment for your home upgrade, only the interest on the loan is tax-deductible. Talk with a tax expert for qualifications on HELOC.
You can combine these tax deductions with special offers from reliable contractors like Handyman Connection of Jeffersonville so you can save more. We are your leading provider of local home remodeling services. Call us at (888) 766-3189 or complete our online request form for a free consultation and estimate.