The weather is warming up, which means it’s time for spring projects. If you’ve got a home improvement list a mile long, don’t forget to save your receipts. They may save you some money come tax time. Feel free to call our tax professionals before you get started on your project. They can give you some guidance on what may or may not be deductible.
As you probably already know, mortgage insurance and interest are tax deductible. Instead of using a credit card, or unsecured loan to finance your project, get a home equity line of credit, second mortgage, or refinance your first one. Some home improvement suppliers or services will try to lure you into using their financing by tempting you with a 0% introductory deal. Be aware that if you don’t pay the entire balance off by the end of the stated period, interest will be charged from the beginning of the loan. If you qualify for a zero-interest offer, secure a home equity line of credit first, take advantage of the zero interest period to pay off as much as possible, and then transfer to the home equity loan where all your interest will at least be tax deductible.
Plan for the Long Run
If you do any upgrades to your home such as, new bathroom, new deck, landscaping, or any electrical updating, you won’t get any tax deductions now but it could save you money down the road. If you decide to sell your home you must pay capital gains on any profits you make. Any expenses that you incur doing upgrades to your home, decreases your profit, thereby lowering the amount of taxes you will pay on your home profit.
Save Money on Utilities and Taxes Too
The government is offering all kinds of credits and deductions for home improvements that are kind to the earth. If you install any energy generating systems, such as solar panels, wind turbines, or fuel cells, you can receive a 30% credit for the cost of the system, including labor and installation. Improvements that add to energy efficiency, such as insulation, exterior doors, windows, and certain roofing items, may also be tax deductible. Saving energy with more efficient water heaters and furnaces not only takes a bite out of your energy bill, but your tax bill as well. Energy Star
is a program started by the EPA that helps consumers identify which products are energy efficient. You can find a comprehensive list on their website.
Work From Home and Deduct the Space
If you add on a space to your home that is specifically dedicated to a work space, it is tax deductible. You can deduct the material costs as well as the labor. You can also depreciate this space annually. If you make any additions to an existing space to make it into a home office, this is also eligible for this deduction. For instance, if you add shelves and a work table to a spare bedroom, the improvement costs are deductible and the space is depreciable.
Let Uncle Sam foot some of the bill on your home improvement projects! Give us a call today at 303-321-7160 and we can help you get every dollar that you are entitled to. If you have any big changes coming up such as a marriage, a child starting college, you’re buying or selling a home, or if you’re doing a remodel, speak to one of our Denver tax planners