Find the Right Renovation Projects to Get Some Relief Come Tax Time

Home improvement deduction

According to statistics from the Home Improvement Research Bureau, home improvement product sales are expected to swell to $293 billion in 2013, a 5.4% increase from last year. They also believe that the trend will continue, and the industry about a 6.9% increase from 2014-2015. While there are lots of factors that contribute to that growth, like the overall improvement of the economy recently, many people find that the financial burden of renovations are eased by home improvement tax deductions. Though beginning a renovation project solely because they can make you eligible for home improvement deductions might not be wise, they can help make them more worthwhile.

Unfortunately, home improvement taxes and rules will vary depending on the specific project, and not every upgrade is eligible for home improvement deductions. For instance, repairs like carpet cleaning, replacing old windows, and new paint are not always considered home improvements by the IRS. Generally, those projects are included, essentially, as the cost of doing business, and, as a result, they are not usually eligible for tax breaks.

According to the IRS, home improvement jobs are those that increase the value of a home and help add longevity to the life of a home. Those projects include things like wiring, adding new heating or air conditioning units, plumbing, and adding a new roof. The work itself might not always be a write off, but, for the most part, the cost of both materials and labor can make those types of renovations eligible for home improvement deductions. So though some of them are necessary, the added bonus of possible tax savings makes them even more beneficial.

Perhaps the best projects to begin if you are thinking about trying to get deductions later on after finishing a renovation are those that help you improve efficiency. The list of Energy Star certified appliances is long, and constantly growing, and those appliances are often eligible for tax breaks. So when a refrigerator or furnace breaks down, replacing it with a more efficient one can be a good choice. As an added bonus to potential tax reductions, their efficiency will help cut monthly utility bills for further savings.

The best way to determine if the project you hope to start is eligible for tax breaks is to do some research. Many contractors are not even completely aware of which projects are eligible for deductions so finding an actual IRS agent or reading more online is a good first step before beginning to upgrade your home.

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