Home Improvement Deductions/Tax Credits

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Home Improvement Deductions

The ground-hog did not see his shadow this year, which by folklore means an early spring is upon us–a time for chirping birds, blooming flowers, and yes, paying taxes!  The good news is the law which Congress passed on January 1st, revived the tax credits for both 2012 and 2013.  If, by chance, you made any eligible home improvements in 2012, start digging up your receipts before you file your taxes for last year because you may get a tax break after all!

Deductions

Tax Deduction vs Tax Credit – In some instances for Home Improvement Deductions, you may be eligible for a tax deduction and in other cases your home improvement(s) may be in the form of a tax credit.  A tax deduction lowers your taxable income amount, while a tax credit takes a set amount right off the taxes you owe.  For example, if you make $50,000/yr and get a $1000 tax deduction, the IRS is only taxing you on $49,000.  The amount you get back depends on your tax bracket.  If you get a $1000 tax credit, you’re still being taxed on $50,000, but you get to take $1000 off the amount you owe Uncle Sam.

Health Related Tax Deductions – If you or someone in your home has a medical condition that requires some sort of remodeling, the cost of that project may count as a tax deduction, providing the costs equals 7.5% or more of your adjusted gross income for that year.  Some examples of such projects are adding wheelchair ramps, installing bathroom handrails, widening doorways,  installing air filtration systems, or a therapeutic hot tub.  It should be noted a doctor’s recommendation is usually required stating the specific condition associated with the medical home remodel.

Energy Efficient Tax Credits – Home improvements and upgrades to increase your home’s energy efficiency are very specific.  It is important to remember that only the cost of the products you are installing are eligible and not the additional installation cost.  The following are examples of energy-efficient improvements which provide a tax credit of 10% of cost up to $500, and expire on 12/31/13:  energy-efficient doors/windows, insulation, air-conditioning of heating, non-solar water heaters, metal or asphalt roofing, or purchasing a biomass stove.   Larger tax credits that provide 30% of cost and extend until 12/31/16 include:  geothermal heat pumps, solar panels or water heaters, wind energy systems, and fuel cells.

It’s sometimes difficult to keep up track of all the tax breaks you may qualify for since there are federal regulations, state regulations, and even separate utility rebates available in some cases.  Before you purchase any new items to upgrade your home, you can research more information by visiting the Tax Incentive Assistance Project.

 

Comments

One Response to “Home Improvement Deductions/Tax Credits”
  1. Don T. says:

    Very informative and well written.

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