If you made any home improvements in 2016, you may be eligible for a tax break or two. Certain home improvements — or certain lines of credit that can be used for home improvements — qualify for a deduction or tax credit from good old Uncle Sam. As you prepare your taxes this year, here are few of credit and deductions to keep in mind.
You probably already know that your property taxes are (usually) tax-deductible, but you can also deduct the interest on a home improvement loan. The interest can be fully deductible up to $100,000, according to the IRS. Similarly, it’s also possible to deduct the interest you pay on a home equity line of credit (HELOC) in most circumstances.
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Making a home greener offers multiple incentives, including decreased energy costs and tax credits from federal, state and local governments. As noted by EnergyStar.gov, examples of improvements and equipment included in the federal tax credit group are:
Improvements made for you, your dependents or your spouse can qualify for tax deductions if they help a person in a wheelchair or with a disability. These deductions must be itemized and cost more than 10% of your adjusted gross annual income. There is also currently an exemption that allows people 65 and older to deduct total medical expenses exceeding 7.5% of their adjusted gross income through tax year 2016.
As outlined by the IRS, examples of medical expenses include:
Were you getting your home ready to sell? Some repairs can qualify as capital improvements. These include:
Tax credits and deductions can help make certain improvements more affordable, but you'll still want to carefully consider your funding, if you're facing (or longing for) a major renovation.
Cash is the "thriftiest" way to pay for home improvements, according to the U.S. Department of Housing and Urban Development (HUD), since you won't be paying any interest or fees. But, if you find yourself facing emergency repairs or need some liquidity to get a carefully considered project completed, homeowners can use financing methods such as:
Of course, you'll want to come up with a plan to pay back any type of financing you take on — and be very careful not to overextend yourself when it comes to renovations. (Granite countertops, for instance, are certainly appealing in theory, but their sheen can wear thin if you can't actually afford the expense.)
Remember, too, there are other ways you can potentially drive down the costs of home repairs. Here are more tips for working some sorely-needed home improvements into your budget this year.
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