Your Top Home Improvement Tax Deductions
Whether you’re a homeowner, renter, property owner, or landlord, the IRS has many different tax deductions that can help lower your taxable income and make filing even more convenient! This article will break down how to deduct from your taxes for some of the most common home improvement expenses.
What is a tax deduction?
A tax deduction is a reduction in your taxable income that you can claim on your federal income tax return. There are many different types of deductions, and each one has specific rules that you must follow. Here are some of the most common home improvement deductions:
Home improvements: This includes things like installing new windows, roofing, painting, and exterior trimming. You can deduct the cost of these improvements even if you don’t itemize deductions.
Property taxes: If you own a home, you may have to pay property taxes every year. You can deduct these payments as part of your mortgage interest and other housing expenses.
Mortgage interest: If you take out a mortgage to buy a home, you may have to pay interest on it. You can deduct this interest as part of your regular income. americantaxservice.org
Insurance premiums: If you own property, you may have to pay insurance premiums every year to protect it from damage or theft. You can deduct these costs as part of your regular expenses.
How to take a tax deduction
There are many tax deductions you can take when remodeling or upgrading your home, depending on the expense and your specific situation. Here’s a list of some common deductions you may be able to take:
Homebuyer’s Credits: You may be able to reduce your taxable income by up to $10,000 if you’re purchasing a home and have earned income below $200,000 in the past two years. The credit is reduced by 25% for every dollar over $250,000 in income.
Property Taxes: Property taxes are often deductible on your federal tax return. You can deduct both state and local property taxes, as long as they exceed 1% of your Adjusted Gross Income (AGI). Certain deductions, like mortgage interest and property insurance premiums, also qualify.
Home Improvement Expenses: Deductible home improvement expenses include things like painting, carpentry work, tile installation and more. The amount you can deduct varies depending on the type of expense and the age of the home being renovated or upgraded. Make sure to get itemized deductions on your tax return so you know exactly what is qualifying.
Mortgage Interest: If you’re using a mortgage to finance your home improvements, interest paid on that loan is usually deductible. This includes both interest charged during the year directly related to the purchase or construction of your home as well as any points that were tacked onto the original loan. Interest paid on refinanced loans is also generally deductible.
Home improvement tax deductions
There are many home improvement tax deduction you can take on your taxes this year. Here are some of the most common:
- Property taxes: If you have a mortgage, property taxes are probably one of the biggest expenses you pay each year. If you itemize your deductions, you can deduct these payments as well as interest and other related expenses.
- Home improvements: You can deduct costs for things like new windows, doors, roofs, siding and gutters. You may also be able to deduct the cost of materials used in these projects.
- Home office improvements: If you use part of your home as an office, you may be able to deduct costs for things like new carpeting or paint job.
- Tax preparation fees: If you hire someone to do your taxes for you, you can deduct the cost of that service as a business expense.
- Moving expenses: If you move because of a job change or because your home is sold, you may be able to claim some of the costs associated with that move, such as transportation and storage fees..
The top home improvement tax deductions
The top home improvement tax deductions include:
-Home ownership interest: You can deduct the interest you pay on your mortgage. This includes any points you have to pay, as well as the amount of interest you are actually paying.
-Insurance premiums: If you have homeowners insurance, you can deduct the premiums.
-Property taxes and fees: If you own a home, you may have to pay property taxes and fees each year. You can also deduct these expenses if they exceed 1% of your Adjusted Gross Income (AGI).
-Improvements to your home: You can deduct any improvements you make to your home, such as new flooring, windows or doors.
-Damages caused by natural disasters: If a natural disaster destroys part of your home, you may be able to claim disaster damages on your taxes.
How much money can you save with each deduction?
There are many ways to reduce your tax liability through deductions, but some of the most common include:
-Property taxes: If you qualify for the mortgage interest deduction, you can also deduct property taxes. The IRS limits this deduction to $10,000 per year.
-State and local taxes: Paying your state and local taxes through an escrow account or via a direct deposit can save you money. Make sure to consult with your accountant to see if any of your specific deductions could save you more money than paying in lump sum.
-Medical expenses: Deductible medical expenses (including premiums for health insurance) can amount to a sizeable chunk of your income. You may be able to exclude large amounts of these costs from your taxable income. Consult with a tax professional to see if this is feasible for you.
-Charitable donations: You can deduct charitable donations made during the year, as long as the donation is made in writing and is itemized on your tax return. This includes donations made to churches, synagogues, mosques, and other nonprofit organizations.
-Home improvements: Making improvements to your home such as adding insulation, upgrading windows or doors, or installing new appliances can save you a lot of money in taxes over time. Make sure to keep good records of all the expenses associated with these improvements so that you can accurately claim them on your tax return.
