Spring is fast approaching and for the homeowner there is one sure thing on their mind….remodel! However, before you jump into the remodeling frenzy you should know whether or not your remodel will qualify for a home improvement tax deduction. You may be planning to take out a loan for this long awaited project but bear in mind not all home improvements are eligible for tax credits.
Understanding Home Repairs vs Remodel
Home repairs are defined as fixing a problem in the home (e.g: fixing a leaky faucet or roof or bath tub). Fixing a broken garage door or a broken tile also are repairs. On the other hand a remodel consists of adding a room, redoing the bathroom or kitchen. a remodel in most cases should add value to your property.
The best source of information regarding home improvement tax credit is from the IRS. They will detail the many home improvements that will qualify for tax credits. The list includes adding energy efficient windows, installing insulation, solar water heating and various other types of high efficient heating and cooling equipment.
Tax Deduction vs Tax Credit
A tax deduction is taken directly off of income so you will pay less taxes while a tax credit is taken directly from the taxes owed, allowing you to pay less taxes.
Maintaining Good Records
It is critical that you keep all your receipts for your kitchen remodel or any other home improvement projects if you are planning on claiming tax deductions. By doing so you can produce them to the IRS if they should request them.
IRS regulations can be very complex making it difficult for the homeowner to understand what really qualify as home improvements. Be sure to discuss with your accountant prior to the start of your project or consult with your local IRS office for definitive answers.
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