With tax season in full swing, it’s time for homeowners to reap the financial benefits of home renovations and upgrades. This year, there are several renovations that could offer tax deductions or credits that you should know about. When in doubt, remember to talk to your tax professional.

Energy-Efficient Upgrades

Sustainable living has become a buzzword in recent years, and in an effort to increase homeowners’ eco-consciousness, the government offers incentives for energy-efficient improvements. Installing solar panels, energy-saving windows and doors, or improving insulation can lead to substantial savings. The Residential Energy Efficient Property Credit allows homeowners to recoup a portion of their expenses, including installation costs, through their tax returns.

According to the IRS website, “If you make qualified energy-efficient improvements to your home after January 1, 2023, you may qualify for a tax credit up to $3,200. You can claim the credit for improvements made through 2032. 

Enhancements for Health and Accessibility

Renovations aimed at making your home more accessible for medical reasons also come with potential tax advantages. If you, a family member or a dependent requires modifications to your home for medical care—such as installing ramps, widening doors, or modifying bathrooms—these improvements might be deductible. It’s important to note that these modifications should not add to the home’s value but must be intended primarily for medical care.

Rental Property Renovations

Renovations can be a strategic move for both the property value and for tax purposes. Upgrades that improve the property’s value, extend its life, or adapt it for new uses may qualify for deprecation deductions. This includes anything from kitchen remodels to installing new heating and cooling systems.

Staying Informed

Staying updated on the latest regulations is super important, especially with tax laws and credits constantly evolving. Consult with a tax professional to ensure that you’re making the most of the available deductions and credits for your renovations.

Practical Advice for Navigating Renovation Deductions

1. Keep all receipts and records of your renovations. Detailed documentation can support your claims for deductions or credits.
2. Tax laws can be complex, and professional advice is invaluable. A consultation with a tax advisor could provide insights specific to your situation.
3. When planning future renovations, consider their potential tax benefits. This can significantly affect your tax return.

By thoughtfully planning home improvements and renovations, homeowners can enjoy their living space while reaping tax benefits.