Home Improvements Tax Credits

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Homeowners who improve their primary residence may be eligible for tax credits. The home improvement tax credit is available for certain expenses related to the update. Taxpayers can claim a credit of up to 20 percent of the cost of qualifying home improvements not exceeding $1,600 if married filing separately or $2,000 for married filing jointly or an individual filing as head of household. These tax credits can reduce your taxes and increase your after-tax savings. Here’s how they work…

 

Home Improvement Tax Credit

A home improvement tax credit is available for certain expenses related to updating a taxpayer’s primary residence. Additional credits may apply to improve your home, including energy efficiency, accessibility, and converting a non-residential building into a residential installation.

 

Deductibility of Home Improvements

The cost of specific home improvements is fully deductible in the year they are paid. The cost of other modifications is deductible over the years. Expenses treated as a capital cost reduction are spread over ten years. The cost of a significant improvement is deducted over the life of the progress, similar to a mortgage. Any repair, renovation, or additional cost of $1,000 is a considerable improvement. The architectural or engineering fees incurred with a significant modification are also treated as part of the reduction. The amount of the decline is the cost of the improvement reduced by the amount of any reimbursement from the insurance company for the improvement. This reduction in the deduction applies only if the refund is for the entire amount of the progress.

Rehabilitation Tax Credit

The rehabilitation tax credit is available for owners of certified historic structures. The credit applies to specific amounts spent on rehabilitating an existing certified historical system. The credit rate is either 9 percent or 20 percent, depending on the amount paid. If the certified historic structure was acquired on or after December 31, 2017, the 20 percent credit rate applies only if the amount spent to purchase the property was not more than $10,000. The rehabilitation must be certified by the state or the federal government.

Energy Efficient Home Improvement Tax Credit

The energy-efficient home improvement tax credit is 19 percent of the cost of specified energy-efficient improvements to a taxpayer’s principal residence, including installing one or more qualified energy-efficient property elements, such as insulation, storm windows, or solar panels. The credit can be reduced if the cost of the improvements exceeds $200. The distinction is claimed in conjunction with the energy-efficient home credit, which is available to owners of rental properties. The energy-efficient rental property credit is generally 10 percent of the cost of specified energy-efficient improvements to a rental property, such as insulation, storm windows, or solar panels. The credit can be reduced if the cost of the improvements exceeds $200. The energy-efficient home improvement credit can also be claimed for a home that is not the taxpayer’s principal residence. The energy-efficient rental property credit applies only to a rental property and is not available for a home that is not a rental property.

 

Filing deadlines and more

All tax credits are due on the date that the tax return is due. If you expect to be able to claim a home improvement tax credit, it is best to wait until the end of the tax year to file so that you can make a complete list of all qualifying expenses. The home improvement tax credits are available for all homeowners, whether you own a house, condo, or another residence. You do not have to itemize your deductions to claim these credits. They can be claimed on 1040, 1040A, or 1040EZ tax forms. You may also be eligible for other tax credits and deductions that apply to homeowners. The home improvements tax credits can reduce your taxes and increase your after-tax savings.

 

Key takeaway

The home improvement tax credits are available for all homeowners, whether you own a house, condo, or another residence. In addition, you do not have to itemize your deductions to claim these credits. Instead, they can be claimed on 1040, 1040A, or 1040EZ tax forms. As a result, these tax credits can reduce your taxes and increase your after-tax savings. For example, the energy-efficient home improvement tax credit is 19 percent of the cost of specified energy-efficient improvements to a taxpayer’s principal residence, including installing one or more qualified energy-efficient property elements, such as insulation, storm windows, or solar panels.