What Your Summer Home Renovations Mean for Your Taxes (1440 x 600)

What Your Summer Home Renovations Mean for Your Taxes

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At last, the sun is shining, the birds are chirping, and it’s time to kick back and enjoy the summer. But wait, do you cringe every time you look around your home and backyard? Is the turquoise and pink décor in your kitchen seriously out of date? Maybe it’s time for a few home renovations this summer. Before you begin, consider not only what they will do for your peace of mind but also what they will do for your bottom line.

In general, you cannot deduct renovations for your home, but there are a few exceptions. On the other hand, home improvements that are not tax deductible can be added to the cost of your home when you sell, reducing the amount of any gain that is subject to capital gains tax. This applies to all improvements to the home, but it doesn’t include small repairs.

The IRS describes repairs as things that are done to maintain a home’s good condition without adding value or prolonging its life. For instance, patching your roof is just a repair, but replacing your roof is an improvement you can add to the cost of your home, lowering the amount subject to capital gains if you sell your home.

Wouldn’t it be great if Uncle Sam could pay for some home improvements? In some instances, home improvements can create a tax deduction or credit that reduces your tax bill. Here are four areas where you can take a tax deduction or tax credit for improvements you make to your home.

Medical necessities. If a debilitating condition has confined someone in your family to a wheelchair, the cost of adding wheelchair ramps to your home is probably a tax-deductible medical expense and so is anything else that’s needed to adapt the home: widening doors, lowering cabinets, adding handrails in the bathroom, etc. If a family member has asthma, then a doctor may recommend you install an air cleanser throughout the home. That, too, would likely be a medical necessity.

Home improvements that are considered a medical necessity can be a medical expense deduction. The IRS allows you to deduct qualified medical expenses that are more than 7.5% of your adjusted gross income for the 2023 tax year. 

Energy tax credits. Tired of paying high electric bills? Consider installing solar energy panels or qualified clean energy property in your home. You’ll enjoy a reduction in your energy costs, and you’ll get a solar-electric tax credit of 30% of the costs if the panels are placed in service anytime from 2022 through 2033. If you have a vacation home in the United States that you live in part-time and don’t rent to others, you may be able to claim a credit for certain improvements The costs of solar water-heating systems, wind turbines, geothermal heat pumps, fuel cells, and battery storage technology qualify for the credit. 

Interest deductions. If you take out a loan secured by your principal residence to make improvements to your home, you can still deduct the interest on the loan.

Property taxes. If your home improvements increase the value of your home, they may trigger an increase in your property taxes. Though higher property taxes take more out of your pocket each year, they qualify as an itemized deduction on your taxes, up to total deductible property taxes which is capped at $10,000 for state and local property, income taxes or sales taxes in aggregate.

Don’t worry about knowing these tax rules. Meet with a TurboTax Full Service expert who can prepare, sign and file your taxes, so you can be 100% confident your taxes are done right. Start TurboTax Live Full Service today, in English or Spanish, and get your taxes done and off your mind. 

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