The Top 4 Home Renovations to Save Money on Your Taxes - When most homeowners decide to renovate, it's because they want to increase the value of their home, but there's also another big perk to remodeling – tax deductions! After all, if you're going to spend money making upgrades to your home, you might as well save some cash at tax time, right?
There are several remodeling projects that are eligible for homeowner tax credits. Of course, the renovations must meet Energy Star efficiency guidelines, but that just means you save twice – on your taxes, and by lowering your utility bills. So which renovations qualify? And, if you have a limited budget, which projects should you focus on first? Here's our top 4 list:
1. Air systems
Certain energy-efficient heating, ventilating, and air-conditioning units qualify for tax credits. So, if you need an air-source heat pump, a new central air-conditioning unit, gas and oil hot water boilers, or a new natural gas or propane furnace, you can take the purchase as a tax deduction – as long as the model you purchase meets Energy Star guidelines. In fact, the price of the unit itself isn’t the only thing you can deduct. You can also deduct installation fees. And, since these units are most likely more energy-efficient than what you’ve currently got in your home, you'll also save on your utility bills.
2. New doors and windows
If you're looking to make your home more energy efficient, but don't have a lot of money to spend, consider replacing your doors and windows. It’s cheaper to do than some of the other renovations on the list, and can immediately reduce your utility bills – especially if the climate-controlled air inside your home is leaking out of them! To receive the tax breaks, the new windows and doors you purchase must meet certain insulation ratings, which will prove that they prevent heat from escaping from the home. Specifically, your windows must have a solar heat gain coefficient of 0.30 or less, and your doors must have a U-factor of 0.30 or less. Don't worry if those numbers don't make sense! Someone at your home improvement store can help you find the right models! As far as your taxes go, you're allowed to deduct 10% of the cost, up to $500, but windows are capped at $200.
3. New insulation
Just like your doors and windows, old insulation can allow heat to escape your home, meaning you might be paying more in utility bills than you should be. If you upgrade the insulation in your home, you can qualify for tax breaks for 30% of the costs, up to $1,500. One thing to remember though – you will only be allowed to deduct the cost of the materials, not the installation costs.
4. A new roof
A new roof would be higher on our list, but it's a big expense, and the government won’t let you deduct a large amount of the cost from your taxes. Both metal roofs with appropriate pigmented coatings and asphalt roofs with appropriate cooling granules that meet Energy Star requirements qualify. However, you’ll only be able to deduct 10% of the material costs up to $500, and like the insulation, you won’t be able to deduct any of the labor costs.
These are just some of the remodeling projects that are tax deductible. For the full list of the renovations that qualify for tax credits, visit EnergyStar.gov.
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