There is a possibility to save some tax money for home improvements and repairs by following definite criteria. There are many cases in which the government offers home improvement tax deductions. This cuts the cost of your home improvement plan a little and helps you analyze the actual value of your house including the home improvements. In order to get a home improvement tax deduction you would have to fall into a particular criteria set by the authorities. To make sure that you fall exactly into that criterion you would have to keep an honest record of all your home improvements. It is very important to understand the difference between an improvement and repair. Adding a pool or a garage, enlarging a room for example are home improvements. Improvements, one way or the other increases the value of the house. Repair however, only prevents the value from depreciation by fixing whatever is going wrong. For example, repairing a bathroom fixtures or pipes from leaking is repair.
Home Improvements in which Home Improvement Tax Deduction Apply
A home improvement tax deduction is applicable only in some cases. Some of the major home improvement tax deduction situations are:
Disabled Friendly Home Improvements
For example, if you want to make your house more disable friendly then you can get a tax deduction for home improvement. You would have to submit a doctor’s letter recommending you for a home improvement due to any disability of any member of the family. Medical deduction however, will only be valid for the amount that exceeds the increased value of the home as a result of the improvements made.
Energy Efficient Home Improvements
Other than for medical purposes, if you are making home improvements and making your house more energy efficient then the additional credits are offered by the Internal Revenue Service (IRS). Even some repairs could be considered for tax deduction if qualified for energy credits. Energy saving is more of a national issue so the tax deduction is applicable in this case as well.
Donating to a Charity
Another way for tax deduction is by donating all the left over construction material to charity. It is important to note here that the material should at least be enough to build a low cost house. Then you would be able to claim the cost of the donated material as a charitable deduction.
Home Improvement Tax Deduction for Hurricane Katrina Victims
IRS has improvised a special home improvement tax deduction for the victims of Hurricane Katrina planning on rebuilding or home improvements. If you fall under this category you can even claim a large home improvement loan too. Do consult with your contractor or IRS for more details.
Repair as a Home Improvement
If you are carrying out a home improvement plan for an area which needed repair, you can claim it as a tax deducatable home improvement too. For example when remodeling a kitchen you can include replacing the leaking pipes under home improvement and claim the complete kitchen remodeling under tax deduction. Repair, if carried out in an area which is being remodeled, can be claimed as part of home improvement tax deduction claim.
Tax Credits vs Home Improvement Tax Deduction
Tax credits can also help you save big time. Where a tax deduction can help you with reducing taxable income, tax itself is reduced through tax credit. These tax credits are available for a gaiety of home improvements i.e. insulation, energy-efficient windows, energy efficient cooling and heating equipments and solar water heating systems. |
