Homeowners may be seeking tax deduction tips when planning for major renovations and improvements within the home. You should definitely consult with an expert tax advisor on what deductions or credits you qualify for, because many taxpayers incorrectly claim some home repairs and home improvements that do not meet the strict IRS standards.
What are the IRS standards?
Unless your home improvement meets one of three standards, the home improvements will not qualify for tax deductions or credits. Generally, the home improvements must be 1) for medical reasons, such as putting in a wheelchair ramp, 2) energy efficiency upgrades and 3) you use a home equity line of credit for the improvements.
Can I deduct or get a credit for home repairs?
You cannot deduct home improvement repairs, which are different from improvements. Home repairs that fix normal items around the house or things that are broken will not qualify for any kind of tax deduction. Some ideas of home repairs include replacing a broken door, replacing a cracked bathtub or rewiring the electrical system in a room. However, if repairs are performed at the same time as a major home improvement, the IRS does allow you to calculate deductions for that. For example, during a major kitchen renovation, a homeowner may include repairing faulty plumbing as part of the renovation.
Which medical home improvements qualify?
Home improvements for medical reasons can be counted as a tax deduction, but only if there is a statement from a doctor certifying that the home improvement is necessary. Without that verification, the IRS will likely not accept the deductions. Most medical home improvements include making accommodations for wheelchairs, installing allergen-free filtration systems or making changes to accommodate medical equipment. However, you can only deduct medical expenses that are more than 7.5 percent of your adjusted gross income.
What about energy efficiency?
You can get a tax credit with energy upgrades. With the Energy Policy Act of 2005, there are new restrictions and regulations in place for energy efficient improvements that may qualify for tax deductions. However, know what the tax deduction rules are before rushing out to completely refit your home. For example, installation of energy efficient products, such as better insulation or heating equipment, will qualify for only a $500 tax deduction. Energy efficient windows will only qualify you for a $200 credit. Be aware that installing solar water heaters will not count if you are using them to heat a sauna, swimming pool or Jacuzzi. Furthermore, these energy-related deductions and credits are always in flux depending on the political climate, so check with your tax advisor regarding your options.
 | You might be eligible for home improvement tax deductions by making changes to your home for medical reasons. Also, by making certain energy-efficient upgrades to your home, like solar panels, you might be eligible to claim home improvement tax credits when you file your federal taxes. |
 | Many homeowners seek insight on home improvement tax credits and tax deductions that will help save them money. Knowing which ones you qualify for can make a difference in what you owe the government. |
A U.S government report estimates the average person pays $400 each year because of missed tax breaks and savings incentives (401K, Roth IRA and IRA plans). For example, according to a 2002 Government Accounting Office report, would you believe nearly one million people failed to itemize there home mortgage interest? |
When taxpayers look for federal and state tax deductions, home improvements are often overlooked. Many homeowners are unaware that the IRS allows for certain tax credits on federal income taxes that pertain to home improvements. |
Recently finished some home improvements? Learn all about home improvement tax deductions including the tax credits you are able to take, get some helpful tax deduction tips and learn how to apply for tax deductions for home improvements. |
