Owning a home can be an expensive proposition. Not only do you need to maintain your home, heat it, cool it, and power it, you also need to pay taxes on it. For some homeowners, all of these things can seem like such a burden that keeping up with things like home improvements, energy upgrades, or repairs can seem overwhelming. What you may not know, however, is that not all of these things are going to cost you as much as you thought, thanks to things like tax deductions, credits, and energy rebates.
Home Tax Deductions
If you file an itemized tax return each year as a homeowner, you may notice a line for things like home repairs. But what qualifies as a home repair? Can you write off a kitchen upgrade?
Keep in mind that you will need to bear the burden of proof for anything you attempt to deduct on your taxes and that some items walk a very fine line between being deductible and not. So always check with your accountant before attempting to deduct something. However, generally, any type of home repair is tax-deductible.
A home repair is something that you do to maintain the current value and condition of your home. For example, if you need a new roof because the old one is leaking, this is a home repair, and it is tax-deductible.
A home improvement, however, is something that adds value to your home and improves its condition – it is not tax-deductible. So a kitchen upgrade can’t be written off, nor can a new white roof that you installed to try to lower your heating bills if your old roof was in good shape.
Rebates and Tax Credits
While the general rule of thumb for tax deductions is that home repairs are deductible, but home improvements are not, there is a loophole for certain types of home improvements which may earn you either a tax credit or what’s called an energy rebate. These are home improvements or upgrades that you do that increase the energy efficiency of your home.
This type of rebate or credit changes very frequently, and many rebates are only available in certain areas, so you need to do your homework ahead of time to see if what you’re planning to do will qualify. For example, for a long time, many Massachusetts towns were offering a $100 cash rebate if you installed an energy-efficient, water-saving toilet in your home. You needed to bring your receipt and a letter from your plumber to a town hall to qualify.
A partial list of energy tax credits and rebates may be found at energystar.gov; keep in mind that this list is updated yearly and things are not always retroactively eligible.
For a more current list, pay a visit to your town or city hall and ask about what credits or rebates may be available in your area. If you do this before taking on a home improvement, you may be able to save money by purchasing a specific appliance. Keep in mind that by choosing energy-efficient upgrades, you’ll not only be potentially eligible for a credit or rebate, but you are also likely to save money each month on your energy bills as well, allowing your home improvement to pay for itself over its lifetime.
It pays to do your homework before embarking on a new remodel, home improvement, or home repair. Be sure to pay a visit to your town hall, check the Energy Star website, and speak with your Pro about what might be possible.
When you’re ready to begin, sign up with BEYREP to get matched with a knowledgeable Pro who can help you navigate some of these tricky home owning areas.