"When many think of tax deductions, donations to charities or medical expenses might come to mind. But there are also home renovation projects that let you take deductions to reduce your taxable income and credits to lower the amount you owe, so you can keep more money in your wallet. Here's what you need to know and how to leverage these tax opportunities."
"If you're adding value to your house through additional bedrooms, bathrooms, energy-efficient lighting, or a new roof, then that is an improvement. It increases your property value and could be tax-deductible, particularly if tackled in the same year you sell. Meanwhile, a repair is something that simply returns a home to its original state. That could mean fixing a toilet or replacing windows without installing new energy-efficient products."
"There are stipulations and requirements surrounding any of the improvements and repairs that you can claim. In some cases, you can claim these once a year they were made, while in others, they can be spread over several years. This is called depreciation, and you can claim a portion every tax year for a set amount of time. In other cases, you can claim certain improvements or repairs if they were made prior to the sale of a property."
Home renovation projects can provide tax deductions to reduce taxable income and tax credits to lower tax owed. Improvements add value to a property, such as adding bedrooms, bathrooms, energy-efficient lighting, or a new roof, and may be tax-deductible especially if made in the year of sale. Repairs restore a home to its original condition, like fixing a toilet or replacing windows without adding energy-efficient features, and typically are treated differently. Some costs can be deducted in the year incurred, while others must be depreciated over multiple years. Home office improvements used regularly as the principal place of business may qualify for depreciation.
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