Hoping to get a little more bang for your buck from your home improvement projects? Unfortunately, they’re not tax deductible.
But wait — we have good news. There are a few things you can do to your home to qualify for a tax credit. And investing in home renovations will benefit you in the long run when it comes to your taxable capital gain, since it increases your property’s total financial investment.
Generally, renovations like building an addition, remodeling a kitchen, or adding a bathroom don’t get you tax breaks. But they do usually add value to your home, which can increase your tax-free profit when selling the house.
How to Get a Tax Credit From Home Improvements
The key to getting a tax credit (a dollar-for-dollar reduction of your tax bill) from home renovations is installing energy efficient equipment. According to the Renewable Energy Tax Credit, the IRS allows energy saving improvements made to a personal residence before January 1, 2020 to qualify for the one-time tax credit.
It lets you write off 30 percent of the cost of these types of technology in your home:
- Solar
- Geothermal
- Wind
- Fuel cell
Another way to get a tax credit from home improvements is to renovate your home office. You can write off business expenses in your taxes, and if you work from home, your office can typically qualify as a business expense. If you’re unsure, talk to your tax professional about which expenses qualify.
Lastly, think about donating old appliances, cabinets, or fixtures you won’t be using in your newly remodeled space. When you work with Dave Fox, we’ll gladly donate any salvageable pieces to Habitat for Humanity and pass the tax deductions off to you. It’s a win-win: Your old items get put to good use, and you get extra tax deductions.
Increasing Your Home’s Value
Another way to get a tax break is through capital improvements. These are things you do to your home that add value. When you sell your home, your profit (tax basis) is only taxed if your gain is over $250,000 for a single person or $500,000 for a married couple filing jointly.
That means you don’t pay taxes on your profit as long as it’s under a certain amount. So while it’s not necessarily a tax credit, it’s less money going towards taxes (and more money for your bank account.)
Even though home renovations aren’t typically tax deductible, they’re often a smart financial decision when they improve the value of your home. Certain items also qualify for tax breaks. That means here are ways to get some bang for your buck, after all.
Remodels, Renovations, and Additions in Columbus, Ohio
Dave Fox is an employee-owned company that makes our clients our number one priority. We design and build remodeling, renovation, and addition projects for our clients in Central Ohio and deliver the best value through exceptional craftsmanship, excellent materials, and ethical business practices. Contact us today to learn more and sign up for our newsletter here!