What Can You Claim on Taxes for Home Improvements?
Did you know that there are millions, sometimes even billions of unclaimed tax money left unclaimed every year by Americans? It’s true, according to the IRS, there was $1 billion in unclaimed tax rebates in 2020. This blog will cover the types of investments that different home improvements fall under, provide steps to take for each category, and highlight available grants for them. By understanding these opportunities, you can maximize your financial benefits and ensure you don’t miss out on potential savings. So, if you just searched “What can you claim on taxes for home improvements?” … you couldn’t have landed on a better page!
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Time is Of the Essence: Don't Wait to File!
The IRS estimates that a significant amount of tax refunds go unclaimed each year. Under the law, taxpayers usually have three years to file and claim their tax refunds. If they don’t file within this period, the money becomes the property of the U.S. Treasury. Don’t let your hard-earned money slip away—start gathering your records and file your tax returns as soon as possible to claim your refunds and take advantage of available credits and deductions.
So, What Can You Claim on Taxes for Home Improvements?
When it comes to home improvements, understanding the different types of investments can help you make informed decisions and maximize your financial benefits. Here’s an overview of the main categories of home improvement investments:
Capital Improvements (Helical Piers, Sheet Pile Walls, Adding a New Room)
Capital improvements are permanent structural changes or restorations that enhance your home’s value, prolong its useful life, or adapt it to new uses. These improvements can increase your home’s basis, which is the value used to determine your taxable gain when you sell your home.
Examples of capital improvements include:
- Adding a New Room: Expanding your living space by adding a new room can significantly increase your home’s value.
- Installing Helical Piers: Helical piers enhance the foundation stability of your home, especially in areas with unstable soil.
- Installing Sheet Pile Walls: Sheet pile walls provide robust support and protection against soil erosion and water intrusion.
- Upgrading HVAC Systems: Modernizing your heating, ventilation, and air conditioning systems can enhance energy efficiency and comfort.
By increasing your home’s basis, capital improvements can reduce the taxable gain when you sell your property, potentially lowering your tax liability.
Energy-Efficient Improvements (Poly Foam Grouting, Upgrading HVAC Systems, Solar Panels)
Energy-efficient home improvements can qualify for federal tax credits, making them a smart investment for both your wallet and the environment. The Residential Energy Efficient Property Credit allows you to claim a percentage of the cost of certain energy-efficient improvements, such as:
- Solar Panels: Installing solar panels can significantly reduce your energy bills and qualify for a substantial tax credit.
- Energy-Efficient Windows: Replacing old windows with energy-efficient ones can improve insulation and reduce heating and cooling costs.
- Insulation: Adding insulation to your home can enhance energy efficiency and comfort, while also qualifying for tax credits.
To claim these credits, you must ensure that the improvements meet specific energy efficiency standards and keep detailed records of the expenses.
Medical Home Improvements (Wheelchair Ramps, Handrails, Bathroom Modifications)
Home improvements made for medical reasons can be essential for enhancing accessibility and safety. These improvements can often be deducted as medical expenses if they exceed a certain percentage of your adjusted gross income.
Examples of medical home improvements include:
- Wheelchair Ramps: Installing ramps to provide easier access to your home.
- Handrails: Adding handrails in bathrooms and along staircases to prevent falls.
- Wider Doorways: Modifying doorways to accommodate wheelchairs or walkers.
- Bathroom Modifications: Installing walk-in tubs or roll-in showers for easier access.
These expenses can be deducted as medical expenses if they are necessary for medical care and exceed 7.5% of your adjusted gross income. It’s important to keep detailed records and receipts to support your claims.
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Non-Deductible Home Improvements (Painting, Fixing Leaks, Replacing Broken Hardware)
Not all home improvements qualify for tax deductions. Routine repairs and maintenance, such as painting, fixing leaks, or replacing broken hardware, do not qualify. These types of improvements are considered general upkeep and do not add significant value to your home.
Examples of non-deductible improvements include:
- Painting: Repainting the interior or exterior of your home.
- Fixing Leaks: Repairing leaks in the roof or plumbing.
- Replacing Broken Hardware: Replacing doorknobs, faucets, or other small fixtures.
These improvements are necessary for maintaining your home but do not provide tax benefits.
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How to Claim Tax Deductions for Home Improvements
To claim tax deductions for home improvements, follow these steps:
- Document Expenses: Keep detailed records and receipts of all expenses related to the improvements.
- Determine Eligibility: Ensure the improvements qualify for tax deductions based on IRS guidelines.
- Calculate Deductions: Calculate the total amount of eligible expenses and determine if they exceed the required percentage of your adjusted gross income.
- Consult a Tax Professional: Work with a tax professional to ensure you are maximizing your deductions and complying with tax laws.
- File Your Taxes: Include the deductions on your tax return and provide the necessary documentation.
For specific steps related to each type of investment, refer to the table above. Keeping accurate records and consulting with a tax professional can help you navigate the complexities of claiming tax deductions for home improvements.
What Can You Claim on Taxes for Home Improvements: Final Thoughts
We hope that this blog has answered your question, “What Can You Claim on Taxes for Home Improvements?” Understanding the tax implications of home improvements can help you make informed decisions and potentially save money. By knowing what qualifies for tax deductions and credits, you can plan your home improvement projects more effectively.
If You Live in Long Island, Brooklyn, or Queens, NY, Areas, Contact Us Today for Expert Advice on Home Improvements and Tax Benefits!
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