With the passing of the Tax Cuts and Jobs Act in December 2017, itemizing deductions just doesn’t add up. Unless of course you have had a year with very high expenses. But don’t stop reading yet. There are still some ways you may be able to gain some rewards for making your home a better place.
The first area of consideration is home improvements, as opposed to repairs. Repairs, such as fixing a leaky roof or broken garage door do not qualify as deductions. However, improvements to your home such as installing central air conditioning can be helpful when you sell your home. Home improvements are considered capital improvements. The dollar amount for these enhancements can be added to the price you originally paid for your home. This new total is then subtracted from how much your house sells for to determine your total profit. In this way, home improvements help to reduce your profit amount and decrease the amount of taxes paid on the sale. Just like anything else you wish to claim, keep excellent records and receipts of the cost for the work done. You will need them.
If you make home improvements for medical purposes, such as building a wheelchair ramp, it can be deducted as a medical expense. Additionally, if you work from home and use a home office, strictly for business purposes, improvements to the office can be deducted as business expenses.
In Tax Credits for Solar Improvements last January, we discussed the tax credits available to homeowners who go solar or geothermal. These credits are additional ways improving your home can yield tax benefits. Solar credits are still available for a short time. If energy efficient improvements are a consideration for your home, you can learn more about the credits on the IRS website or contact ITP Taxes LLC with questions.