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3 Home Improvement Tax Credits You Won’t Want to Miss Out OnJuly 14th, 2014 by
Who doesn’t love saving money? Because installations and home repairs can be extremely costly and stress inducing, the government offers several federal tax credits to alleviate the pain of having to buy an expensive new product or invest in a big renovation. In order to reap the benefits of these home improvement tax credits, there are several things to consider. Check out the three tax credits for homeowners described below to see if you might qualify for big savings.
If you’re going to invest in new equipment, think about paying a little more for energy efficiency. While it may be slightly pricier up front, the tax credit will put some of that money back into your pocket, and over time, the eco-friendly products will reduce your energy bill costs as well. Until December 31, 2016, you can save up to 30 percent of the cost of geothermal heat pumps, small wind turbines, solar energy systems, and residential fuel cell and microturbine systems. With the exception of the credit for the fuel cell and microturbine systems, the tax credits for the aforementioned equipment have no upper limit and can be applied to existing homes, new constructions, primary residences, secondary homes, and rentals. The fuel cell and microturbine systems credit has a limit of 30 percent of the cost up to $500 per 0.5 kilowatts of power capacity, and it can only be applied to existing homes, new constructions, and primary residences.
What’s more is that installation costs are included in all of these credits. Just make sure that if you do decide to purchase energy-efficient appliances and plan to apply for a tax credit, the product you choose must meet all of the ENERGY STAR program requirements to qualify. Additionally, the tax credit can only be redeemed the year that the product is placed in service, and you must have a Manufacturer Certification Statement.
If you make renovations to your home to accommodate a medical issue, you may also be eligible for a tax credit. The stipulations are that the renovations must be medically necessary and that they cannot add to the value of your home. For example, wheelchair ramps, handrails, and lowering cabinets for accessibility would all qualify for the credit; nothing done to enhance the look of your home or to correct an architectural issue can be used for a credit.
Home Offices and Rentals
Using part of your home for a purpose unrelated to being your primary residence may also enable you to apply for tax credits. If you rent out part of your home or convert a room to a home office, anything you do to improve that area of the house can qualify for a credit, such as adding a new shelving system. Even if you upgrade the heating and air system for the whole house, it will benefit the part of the house being rented or used as an office, so a percentage of that cost relative to the non-residential part of the home can be credited. For the 2014 year, a new rule allows you to deduct $5 for every square foot used as a home office up to $1,500 or 300 square feet, so if your office renovations work out to be less than the new rule’s deduction, you can simply choose the deduction for the space used and skip having to itemize costs.
The next time you’re in the market to change or upgrade your home, do some research to see if your purchase could be eligible for any tax breaks. Every little bit counts in helping to offset large, up-front costs, so don’t let hefty renovation and installation expenses get you down.
Sources: ENERGY STAR; Fox Business; IRS; Nolo; TurboTax.
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