Homeowners take into account a lot of factors when deciding whether or not to pursue home improvement projects. Aesthetics, energy efficiency and costs are some of the common reasons for home improvements, but a lesser-known reason is tax deductions.
To qualify for tax deductions, your home improvement project has to meet certain criteria. Nuss Construction Company discusses them here:
Home Repairs vs. Home Improvements
A lot of homeowners mistake home repairs for home improvements. The key difference between the two is that home repairs restore a part of your house to its original state while home improvements add value to your home. Fixing your bathroom door would be considered a home repair while bathroom remodeling would be considered a home improvement.
Generally, only home improvements can qualify for tax deductions, but, if the repairs were finished at the same time as a home improvement project, part of the repair costs can be treated as part of the said project. Also, keep in mind some home improvements will qualify for tax credits, which lower the taxes you’ll pay, while others will qualify for tax deductions, which lowers your taxable income.
Main Criteria
In addition to increasing the value of your house, home improvements also have to meet at least one of the following criteria:
-
The improvement increases the energy efficiency of your home – Examples include the installation of energy-efficient windows, doors and roofing systems.
-
The improvement was done because of medical reasons – Examples include wheelchair ramps and other structures that can assist persons with disabilities.
-
A home equity line of credit was used to finance the improvements – Only the interest payments are tax deductible.
The tax system is complex, and there’s always a chance you overlooked or misunderstood a tax provision or two. So, you should always consult a CPA.
If you’re looking for a construction company, why not hire one with over 50 years of experience like Nuss Construction Company? We were included in Qualified Remodeler Magazine Top 500 remodelers’ list for more than 10 times since 2000. To set up an appointment, call (856) 988-9982, or fill out this form. We serve homeowners in Cherry Hill and Moorestown, NJ.
