Taxes are notoriously complex, but they don’t have to be. We think it’s time to demystify which home improvement tax deductions you can claim for 2017. Below, we’ve summarized a couple articles from Turbo Tax and other sources to help you approach your Dallas, TX, deductions with clarity this year.
Know the Difference Between Repairs and Improvements
The first concept to understand when filing home improvement tax deductions for 2017 is that you can’t claim repairs but you may be able to claim improvements. What distinguishes the two? Home repairs include maintenance projects like replacing weather stripping around doors, repainting a room, or fixing a gutter.
Home improvements, on the other hand, may be deducted if they fall into one of the following categories: health-related improvements and energy-conservation improvements. (N.B. Home improvements that are made for aesthetic purposes only or to increase your home’s value may not be deducted.)
Health-related improvements are defined as any alterations made to your home for medical purposes. Examples of such alterations include installing wheelchair ramps, hanging handrails, widening hallways and doorways, lowering kitchen countertops, installing motion-sensor lighting for better visibility at night, etc. Again, these improvements may only be claimed if they are medically necessary.
Tax incentives also exist for home improvements that conserve energy. While it used to be true that you could claim tax deductions for all manner of energy-conserving devices(including wind turbines, geothermal heat pumps, and fuel cells), now only solar energy systems(solar water heaters and solar panels) are eligible for deduction.
For solar energy systems, you may receive a federal tax credit of 30% of the total cost of the purchase and installation both in your primary residence and in any vacation homes. Note that the tax credits for energy conservation systems must be applied in the same year the unit is purchased, installed, and put in use. Be ready to provide a Manufacturer Certification Statement for all units you plan to claim.
Be aware that currently, these credits are good through 2019 and will then be reduced in amount each year through the end of 2021, when they expire completely. Additionally, major tax reformation, which includes the elimination of many tax deduction line items, is one of the defining traits of 2018, so we advise investigating the new tax codes thoroughly before counting on hitherto standard monetary deductions.
A Different Type of Home Improvement Tax Deduction: Home Mortgages
The final way that you can save money for home improvements is by taking out a mortgage that includes extra money to finance home renovations at the time of purchase. It might sound counterintuitive to take out a larger mortgage than you need to purchase your home, but doing so when you plan to finance home improvements allows you to deduct interest on the extra loan amount from your income.
Obtaining financial alleviation for home improvements depends on two things: 1) planning ahead and 2) familiarizing yourself with current and future tax trends. We hope this article gives you a starting point for both.