Tax Deductible Home Improvements

Authored by Rodney Southern in Home Improvement, Taxes 
Published on 01-25-2009

Many people are aware that tax deductible home improvements exist, and that by choosing carefully you can get more bang for your buck by improving the market value of your house and deducting the costs from your taxes. However, few people may be aware of which tax deductions are actually tax deductible. Following is a discussion of the most common tax deductible home improvements.

First of all, any home improvements made to a house because of medical necessities are tax deductible as long as your deductions exceed 7.5% of your earnings. That may seem like an impossible benchmark to reach, but if you’re remodeling due to serious medical problems like accidents, strokes or heart attacks, you can easily reach or surpass this cost and the tax deductions are a godsend. The idea is not to penalize people for a sudden-onset disability, and home improvements that might be required under this scenario include wheelchair ramps, bathroom railings, elevators so the injured or ill person can access the second floor of the house, lowering light switches or kitchen cabinets so they’re wheelchair accessible, and even less obvious things like mold remediation or adding air filters for people with asthma or other breathing problems. This is true for any full time resident of your home, as long as you get verification from a doctor that it’s needed. It also works if you’re remodeling your house in order to take in an elderly parent and be their caretaker.

Energy efficiency is another good category of tax deductible home improvements. Adding minimally invasive items like energy efficient windows or improved insulation will save you $500, and if you make a bigger commitment like buying a solar powered water heater, you can get as much as $2,000 back. Although technically it’s not really among the tax deductible home improvements, purchasing a hybrid car is a similar lifestyle change and that will also get you a tax credit.

Tax deductible home improvements can include almost anything that legitimately raises the value of your house if you structure the payments the right way. If you’re planning on making big changes like remodeling your kitchen, adding an extra bedroom, or converting your wood-burning fireplace to gas, if you use a home equity loan to pay for it the interest on the loan is tax deductible. There are certain restrictions to this rule (only some loans qualify, as well as only some improvements), but millions of people have used this to their advantage so it’s well worth your effort to check with a tax expert.

Finally, if you have leftover materials from the remodeling and donate them to a charity that can use them like Habitat for Humanity, you’re getting a triple play! The value of these materials is tax deductible, and you’re also helping people in need, which is even more of a blessing.

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