Whether you’re saving up for a new home or interested in future upgrades for your current abode, home improvements can help you save money on your taxes. In addition to checking home loan rates for potential savings on a future purchase, make sure to take advantage of these tax deductions this April.
The Residential Renewable Energy Tax Credit allows homeowners to cut their tax bills when they install certain appliances in their homes. This includes solar roofs and other sources of solar power, which take some stress off the power grid.
If you installed solar panels last year, you can deduct 30 percent of the cost from your taxes. This tax break will last until 2019, after which the percentage declines over the subsequent years.
Not only will solar power reduce your tax bill and save you money on energy costs, but it can also boost your home’s value. When you decide to sell it, you’ll recoup even more of what you paid to install it. Use that extra cash in addition to favorable home loan rates to make your next house even more affordable.
In addition to solar electric panels, appliances like solar water heaters and geothermal heat pumps can also help you get a tax break. The IRS lets you deduct a certain amount of money for each appliance, and the expiration dates vary depending on what you’ve installed.
Again, energy-saving appliances don’t just cut your tax bill. They will continue to help you save money by using less power, so make sure to factor those savings into the upfront costs when making your decision.
Renovations and Remodeling
If you sold your house last year, you might be able to use home improvements to reduce your tax bill. The IRS allows you to use the cost of renovation or remodeling to offset the amount you pay in taxes. Essentially, you deduct the home improvement expenses from your total profit on the home’s sale. That’s the amount of money on which you must pay taxes.
Since you can’t deduct home improvement costs by themselves, this is the best way to get your money back. If you research home loan rates before you sell, you can get the best deal on a new home and reduce your overall real estate costs for the year.
Updated Rental Property
Taking care of a rental property can get expensive, but you’ll reduce your tax obligations if you keep receipts for updates and improvements you make on the home. If you add a new room to the house, remodel the bathroom, upgrade the appliances, or pay a professional to clean the house, you can deduct those expenses.
The IRS also allows landlords to deduct common rental property costs, such as those associated with advertising, Realtor commissions, and homeowner’s association fees. Keep receipts for all of your rental property expenses, and then let your tax professional show you which ones qualify for a tax break.
When you buy or sell a home, you might feel like you’re spending money too quickly. However, taking advantage of low home loan rates, more energy efficient products, and tax deductions will offset those costs. If you’re thinking about buying a home in the near future, answer a few questions here and a home lending expert will contact you.