When people think of home repairs they don’t generally think of doing them as being a way to lower their tax liability. However, there are some ways that home repairs can lower your tax bill.
There are new home buyer tax credits and deductions available that are applicable when you first purchase the home and even afterward.
Use Your Mortgage for Home Improvements
Do home repairs when you first purchase your home to save.
If your mortgage includes supplementary funds for home repairs, the acquisition cost of your home is included. You’ll then be able to subtract the interest on your home repairs from your income via the mortgage interest deduction.
Some Home Repairs May Be Eligible to Be Claimed as Medical Expenses
If you are making medically required repairs you can deduct them from your income.
How to determine medical expenses:
For example, the following home improvements would qualify as being required medically:
- Entrance or exit ramps
- Bathroom modifications
- Lowering cabinets
- Widening doors and hallways
- Adding handrails
However, when claiming home improvements as medical expenses it’s important to make sure that you’re spending a reasonable amount of money and that you aren’t boosting the price for aesthetic or architectural reasons.
For example, if you add in a wheelchair ramp, you’re eligible for it to be qualified as a medical expense. However, if you also add in a sculpture garden, the home improvement would not be eligible.
Lastly, if by chance the repairs increase your home value, you cannot claim them as a qualifying medical expense.
Take Advantage of Energy Tax Credits
Energy tax credits can reduce your tax liability if you have installed qualifying energy generating systems.
The federal tax credit covers up to 30% of the cost for qualifying:
- Geothermal heat pumps
- Solar water heaters
- Solar panels
- Small wind turbines
- Fuel cells.
Solar credits are effective through 2019 and they will reduce each year until 2021.
Furthermore, with the exception of fuel cells, this credit applies to qualifying things added in your vacation and secondary homes also.
Plus, the credit includes what you have to pay workers, any installation fees, and the only maximum limit is on fuel cells.
Many homeowners love taking advantage of this tax credit because it not only helps them save during tax time, but the investment saves them loads of money on their energy bills.
Use the Home Sale Exemption
If you decide it’s time to sell your home and the profit is less than $250,000 for a single filer or $500,000 for married joint filers, you don’t have to pay capital gains on the appreciation of your primary home.
This exemption will help you lower the funds from the sale that is considered a profit and potentially help you escape capital gains entirely.
Keep in mind that if you file your taxes online you’ll be able to take advantage of all of the home repair tax deductions that you’ll eligible for without having to personally be up to date on the current tax laws. Source: Americantaxservice.org
