Tax season is approaching and you could be eligible for a tax break if you improved certain features of your home or opened credit lines for those improvements. Keep these in mind as you work on filing taxes.
Home repairs like replacing the roof, windows, gutters and doors, and the furnace or HVAC can qualify as capital improvements.
Home Improvement Loans
According to the IRS, you can deduct the interest you have paid on a home improvement loan up to $100,000. You can also possibly write off your paid interest on a home equity line of credit.
Energy Efficiency Improvements
Improvements and equipment that increase your home’s energy efficiency can also qualify for a tax reduction. The improvements included in the federal tax credit group according to EnergyStar.gov are:
- Air source heat pumps: $300 credit
- Central air-conditioning: $300 credit
- Gas, propane, or oil hot water boilers: $150 credit
- Gas, propane, or oil furnaces and fans: $150 credit for furnace, $50 for main air-circulating fan
- Insulation: Up to $500 or 10% of the cost, whichever is lower
- Roofs: 10% of the cost up to $500
- Non-solar water heaters: $300 credit
- Solar water heaters: 30% of equipment and installation costs with no cap
- Windows, doors, and skylights: 10% of the cost up to $200 for windows and skylights; up to $500 for doors
- Geothermal heat pumps: Up to 30% of equipment and installation costs
- Small residential wind turbines: 30% credit
- Residential fuel cells: 30% of the equipment and installation costs with no cap
- Biomass stoves: $300 credit for units with a thermal efficiency rating of 75% or more
You can also receive PACE or Property Assessed Clean Energy financing through HERO (home energy renovation opportunity). PACE offers financing for energy and water efficiency home upgrades with your property tax bill. Flexible repayment plans are available for up to 25 years, with approval based on your history of debt repayment and home equity. PACE will finance the total price of your project and interest on payments to HERO may be tax deductible. You may even be able to transfer remaining payments if you sell your home.
There are over 1 million products geared towards helping you save, from solar paneling to drought tolerant landscaping. Receiving financing from the right program, using eligible products, and keeping track of your expensenses can help you reduce home repair costs, be more energy efficient, and receive tax deductions at the same time.