Monday, January 26, 2015

Do You Qualify for a Tax Reduction for Your Remodel?


Does your home remodel qualify for a tax deduction? In some instances, the answer to that question is yes. This means that you can create the house of your dreams and improve your home's value with the help of the government. What types of deductions are available, and what do you need to do to qualify for them?

Are You Adding Energy Efficient Materials to Your Home?

If you are adding extra insulation, putting new windows in your home or adding energy efficient siding, you could qualify for an Energy STAR exemption. Many state and local governments may reduce your income and/or property taxes depending on the type of work done and the type of product that you added to your property. 

Homeowners who made certain improvements to your home, you may be able to amend your 2012 or 2013 tax returns to claim a $200 credit for installing energy efficient shutters. You can also claim up to 10 percent of any cost savings that you realized for installing energy efficient materials in your home. What happens if you decide to put up shades or blinds to block excess sunlight or because they went with the room? 

If a window shade or other covering is energy efficient and is certified by the manufacturer, it too could be eligible for a federal tax credit that was available until 2013. This again means that you would have to amend your federal return to claim the credit. You have three years after your file a tax return to amend it and reduce your previous tax bill. 

Did You Use Alternate Energy Sources in Your Home?

Those who installed solar water heaters, wind turbines or put solar panels on their home may qualify for a federal tax deduction. This deduction is equal to 30 percent of the cost of the equipment that was purchased or installed. The credit for such equipment is available through the end of 2016, and you can take the credit even if the equipment is purchased and installed on a property that is not your main home. 

Get Tax Breaks for Renovating a Rental Property

Landlords can take a tax break for making improvements to a rental property. Generally, the amount that is spent on repairs and improvements is deducted from any income that your property generates. For instance, if you spent $1,000 installing a new hardwood floor in the master bedroom, that money reduces any profit that you may have made from renting the property. 

If you are the owner-occupant of a rental property, you can still take advantage of this tax break on the part of the property that you are renting. It does not matter if the rental is currently occupied or vacant when the work is completed. Depending on whether or not you declare yourself as a business, you may be entitled to unlimited losses for tax purposes as long as the money is used to improve the property. 

Who knew that remodeling your home could provide so many tax breaks? If you are thinking about putting up new windows, adding solar panels to your roof or taking other steps to improve the value of your property, now is the time to do it. In addition to the tax savings, these steps will make your house more functional and increase its value when it comes time to sell or rent it.

Bio
This contribution comes from JD Main, a Quickbooks consulting firm near Chicago. In addition to Quickbooks, they help customers with accounting, bookkeeping, and part time controlling.

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