In general, you can’t claim federal tax deductions or credits for home improvements, with some notable exceptions. Read on to find out which home-related expenses can help you reduce your tax burden.
Home Improvements for Medical Needs
If you made changes to your house in 2018 because of a medical condition, you can deduct the cost of the work from your taxable income on your federal tax return, if you itemize deductions. Wheelchair ramps, handrails, wider doorways and halls, roll-in showers, lowered countertops and cabinets, and zero-threshold entryways all would qualify if they are medically necessary for someone who lives in your home. But if these improvements increase the value of your home, you must deduct the amount of that value increase before claiming the cost as a medically related expense.
Solar-Energy Tax Credit
Although the federal government no longer offers tax credits for geothermal heat pumps, wind turbines, or fuel cells installed at homes, it still does give credits for photovoltaic cells. If you installed a solar system that started providing electricity in 2018, you can deduct from your taxes 30 percent of the cost of the system and the labor to install it. Different from a tax deduction, which reduces the amount of your taxable income, a tax credit is a reduction in the amount of tax you owe the federal government. The credit will remain at 30 percent through 2019 before dropping to 26 percent in 2020 and 22 percent in 2021, the final year of the credit. There is no limit to the credit, so if you spent $20,000 on a solar system in 2018, you can get $6,000 off your federal income taxes.
Solar in Texas
Because Texas doesn’t have an income tax, you obviously can’t get a deduction or credit for home expenses. But homeowners who get their electricity from Oncor, a utility that serves 410 communities in Texas, including the Dallas area, can take advantage of a cash rebate from Oncor. The electric company pays the rebate directly to the solar-energy provider, which decides how much of that rebate to pass along to the homeowner. Only new systems installed on existing homes are eligible.
Paying for Improvements with Your Mortgage
The interest payments on your home mortgage are deductible on your income taxes, so one way to turn that to your advantage is to include extra money in your mortgage to pay for renovations. Then your home-improvement costs will be part of your mortgage-interest deduction.
Other Home-Related Deductions
- Mortgage points.
- State and local property taxes.
- Interest payments on home-equity loans and lines of credit.
- Home office (but only if it’s your primary place of conducting business, it’s used regularly, and it’s not used for anything else).