03/22/2024
"That's a write off!"
It's a phrase I commonly hear thrown around. But, not so fast... it turns out not all home improvements are treated equally from a tax perspective.
Let's break it down:
Home Office Deduction:
To claim a deduction, you must have a dedicated and exclusive workspace. Using your dining table unfortunately doesn’t qualify here.
Rental Properties:
When updating rental properties, you won’t be able to deduct the renovation costs.
But, expenses like mortgage interest, property tax, operating costs, depreciation, and repairs are usually eligible deductions to take. Keep a running tally of these expenses.
Residential Medical Upgrades:
Expenses related to improving medical accessibility are deductible. This includes constructing entrance or exit ramps, widening doorways, installing railings or support bars, and making bathroom modifications.
Energy-Efficient Improvements:
Consider energy-efficient upgrades. Things like installing solar panels, solar water heaters, small wind energy turbines, geothermal heat pumps, fuel cells, and biomass fuel stoves qualify for various tax benefits.
Home Sellers Deduction:
If you make improvements to your home before selling it, they can increase your home's basis (purchase price + improvements), reducing capital gains and, in turn, lowering the taxes you'll owe. Keep a running spreadsheet of those improvements!
Make sure to collab with a tax pro to maximize your deductions. What did I miss? Comment below!
