Home Retrofits That May Lower Your Tax Bill
It’s tax season and a few eligible home improvement projects may allow for home owners to deduct the expense or even get a tax credit. Realtor.com® recently highlighted these four home renovations that can lower a tax bill:
1. Energy generators: Home owners may be eligible to receive up to a 30 percent tax credit on the cost of purchasing and installing “alternative energy equipment.” This could include solar electric systems, solar water heaters, wind turbines, or geothermal heat pumps.
2. Medical retrofits: Home owners affected by a serious illness may need to have updated their home with medically necessary retrofits. They may be able to deduct these from their income (itemizing through Schedule A). For example, some deductible expenses may include a wheelchair ramp, widening doorways, lowering the cabinets, or grading the ground so that access is easier to the home.
3. Energy-efficient add-ons: The IRS may offer you a break for energy-efficient retrofits too. For example, energy-efficient doors, windows, or skylights may qualify for a credit up to $500 on your taxes. Also, energy-efficient changes like an HVAC upgrade, roof, and insulation may also qualify. The new additions are required to be Energy Star-rated and must be installed on a primary residence, not an investment property.
4. Home improvements added to your mortgage: Here’s a roundabout way to get a tax credit. Home owners planning to make renovations to a home after they buy it may want to consider taking out a larger mortgage to cover the expenses. After all, mortgage interest is deductible. Home equity line of credit and home improvement loans are tax deductible too. But remember, it’s still a loan.
Source: “4 Home Improvements That Can Lower (or Eliminate) Your Tax Bill,” realtor.com® (March 14, 2016)
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