Today, several types of home upgrades and capital projects can impact your home when you choose to sell it, but many renovations can even provide you with tax incentives that can be a big benefit to your investment portfolio. If you are thinking in investing in some home upgrade projects, the following are associated with excellent tax incentives that can enhance your home as well as your investment in it.
Energy-Saving Improvements to Your Home
When you install energy-saving equipment in your home, you may qualify for federal tax credits. Replacing your windows, for example, with energy-efficient windows may earn you a terrific tax credit. Choosing a sustainable form of energy to power your home like solar, wind, or geothermal energy can win you some tax breaks as well. While these projects require substantial investment, you can recoup much of the cost of installation and the equipment itself with your energy savings as it grows over time. Energy-saving upgrades are among the most popular with property investors today as they not only qualify for tax incentives, but they also can enhance the value of the home or commercial building as well.
Putting a new addition on your home can add considerably to its value. Your investment can also save you some tax dollars over time. According to news sources like Business Insider, you cannot claim a capital upgrade to your home in the current tax year. If you add a new bedroom to your home, for example, you’ll need to wait until the following year to claim it in order to qualify for that tax break. Moreover, you’ll only save a portion on taxes as the depreciation of the new addition will be spread out for a set period of time. Your accountant or general contractor can help you determine what qualifies for claiming and what does not. Fixing a hole in the roof, for example, doesn’t qualify as a capital investment because it’s regarded as maintenance and repair. However, if you fix a leaking pipe while you are upgrading your kitchen, you can claim the entire project beginning after the current tax year.
According to recent tax legislation, if you have to put in a ramp or install a handicap-accessible bathroom in your home, you can qualify for tax incentives. Other medical improvements like an air purifier for the furnace or an elevator can qualify for deductions if they are recommended by a qualified medical doctor. If someone in your home is in a wheelchair, you can claim upgrades such as lowering the kitchen cabinets or widening hallways to accommodate the conveyance. Again, you’ll want to talk to your accountant about what upgrades qualify for this type of tax incentive.
Home improvements don’t always come with a tax incentive or credit but it’s certainly nice for homeowners and commercial property owners when they do. You can discuss your project and its tax incentive viability with your contractor or your accountant to find out more. Remember to research the ins of outs of any investment project before launching so that you can ensure that it meets any requirements associated with applicable tax incentives. Although the tax process can be tricky, many investors have profited by taking the time to understand the regulations associated with their property upgrades that qualify for tax breaks and incentives.