This is it. We’re a week away from the deadline to file your personal taxes. This year, taxpayers and tax preparers (like your Brigade Bookkeeping team) get three extra days to file because Washington D.C. Emancipation Day is being celebrated on our regular tax deadline of April 15th. Use your time wisely and if you haven’t even started your tax return, get to it!
One of the questions many of my clients ask me is “can we deduct home renovations on our taxes?” The general answer is “no”, unless you’re selling your home or renting it. More on that in a minute, but because my team and I are experts on the tax code, there are some improvements we found that you can but get tax breaks for. They all have one thing in common, energy. Here are some tax breaks you can file for:
- Energy Efficiency – If you own a home and make improvements to your home’s solar, wind fuel-cell or geothermal efficiency, you can apply for the Residential Energy Efficiency Property Credit by fling Form 5695. This credit includes items such as: adding solar panels to generate electricity, using a solar-powered water heater to heat at least half of your home’s water usage (sorry swimming pools or hot tubs don’t count), using wind turbines for electricity or even using a renewable resource to generate power for your home.
- Renewable Energy – If you use solar, wind or geothermal equipment as sources of renewable energy in your primary residence or second home, you can claim the Residential Energy Efficiency Property Credit. The credit is equal to 30% of the cost, including installation.
- Non-business Energy Property Tax Credit – Did you know there’s a tax credit for making qualified energy efficiency improvements to your home? The tax credit includes improvements such as: insulating your home, changing exterior doors and windows, adding skylights and using certain roofing materials to improve energy efficiency. Consult irs.gov or e-mail or call us to see if your home improvement qualifies.
- Selling Your Home – If you’re selling your home, you are allowed to include any home improvement costs the year of sale in your home’s adjusted cost basis. There are requirements. Home improvements can only be deducted if it added material value to your home, created a new use in your home or improved your home’s useful life. If this is confusing, feel free to email or call one of our tax code experts for more information.
Home improvements generally cannot be deducted from your taxes on your personal residence, but if you own a rental property, you are allowed to deduct items such as: cleaning and cleaning supplies, repairs, utilities, insurance, management fees, lease cancellation costs, advertising, legal and professional fees and even mortgage interest. There are a lot of other deductible expenses too, so double check with your accountant or bookkeeper or email or give us a call.
Remember, you have a week to file your personal taxes or to ask for an extension. Don’t procrastinate any longer. April 18th is almost here. Look at it this way, maybe you’re getting a refund this year. One can only hope!