Are Remodeling Costs Tax-Deductible?

There are a great number of questions that you will have when you are remodeling your home and making improvements

One of the most common questions is whether remodeling costs are tax-deductible. Home renovation costs can be pretty high, and your remodeling costs are going to add value to your home. Remodeling your house is not normally something that can be deducted from your federal income taxes. However, there are some things that you can do for home remodeling and upgrades to decrease your taxes over time. This includes looking at the tax breaks, incentives for remodeling, and the enhancements you can make to your house. Whether you buy the home first, or after you have signed the dotted line.

Here are some of the ways that you can make your remodeling costs tax-deductible.

• Use your mortgage. One of the best ways to reduce your home remodeling expenses is to make the upgrades to the house after you have bought it. Sometimes, the house loan you are taking out as your mortgage incorporates extra money to make the right upgrades. This means that your purchasing price for the house will contain this amount. You can then deduct the interest charges on this amount from your earnings as an element of your mortgage interest deduction when you pay your taxes.
• Remodeling costs for medical expenses. Are you remodeling your property because the enhancements are medically required? If so, the upgrades to your house can be subtracted from your earnings as medical-related costs. If you have to install exit or entry ramps, lower the cupboards, expand the doorways, add handrails, or customize the washroom – anything to make your life easier for medical reasons. These can all be cited as medical-related costs. However, it’s important to remember that these expenses have to be sensible and they have to match the medical objectives that you have. A wheelchair-accessible property, for example, meets this requirement. 
• Energy tax incentives. Did you know that you can receive federal tax credits of 30% of the price for geothermal heat pumps? You can even receive credit for solar power hot water heaters or compact wind generators. These are all tax benefits that you can enjoy and the 30% credit applies to the price of the house. It also includes manual labor and setup, and there is no maximum restriction here. 
• Exclusions for your house sale. You will not be required to pay capital gains on the increase in the value of your residence once you sell it based on your remodeling efforts. This only applies if your profit margin is under $250,000. A house makeover improves your home, which means it can reduce the amount of your final sale price. This is measured as your profit, so if it comes under the required amount on an enhanced basis it would likely reduce the taxable amount of the selling price. Ask your mortgage provider whether you would be eligible for any tax deductions with your new home.

Give us a call so one of our experts can talk to you to determine how best to carry out your remodeling project. We will provide you with an affordable estimate and get the job done quickly.

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