Tax Write-Offs That Are Available For Home Improvements

One of the biggest benefits to buying a home is that of the tax savings for you. You own a home now, so there’s no more monthly rental payments going out the window. All of your mortgage payments are going towards your financial future. There’s many different types of tax breaks that you can get from owning your home. Many home improvement projects that allow you an extra tax break are hiding right in the fine print! Tax breaks are known as “incentives.” These incentives are essentially what help people to get important things in their homes done without having a order placed on them. There are some hidden things that you may not have known could be used as tax write-offs.  

Energy Savings


From putting solar panels on your home to replacing appliances, there are certain tax breaks that you can get for making your home more energy efficient. There are lifetime caps on these deductions, but on a certain year, you’ll be able to save some extra money on your taxes. Some of the deductions that you might be able to claim include:

  • Air-source heat pumps
  • Biomass stoves
  • Central AC units
  • Water heaters
  • Certain energy-generation systems which include an array of things like water heaters, solar panels, fuel cell systems, wind turbines, and geothermal heat pumps.

You can deduct somewhere in the neighborhood of 30% of the cost of these improvements to your home. It doesn’t hurt to check on the updated standards that are introduced each year by the government. Your accountant can help you to understand your own deductions a bit more in-depth. 

Modifying Your Home For Medical Needs

If you need to modify your home in order to accommodate medical needs, you may be eligible for a tax deduction. The modifications must not increase the value of your home and be medically necessary. If the doctor tells you to lose weight and you put in a home gym, you can’t deduct that. If you need a ramp put in your home for wheelchair accessibility, then that can be deducted. The cost of the modifications generally has to exceed 10% of your adjusted gross income, or 7.5% if you’re over the age of 65. 

What’s Not Deductible

If you have done some major remodeling around your home, it’s sad to say that these improvements probably aren’t tax deductible. On the positive side, you will get a bigger return on your home when you do decide to sell it. This could help you to reduce any capital gains tax that you may have to pay on the sale of the home.

Remember that when you make improvements to your home, you’re doing it first for your own needs. Any tax write-offs that you may get are merely a bonus.

Tax Deductions You Should Know About

One benefit of owning a home is that come tax time, there are a variety of things you can claim deductions for. Whether you have someone prepare your taxes for you, or do them yourself, it is good to know all the types of deductions you can take to ensure you lower your taxes as much as possible.

First things first, in order to take advantage of the deductions you will likely need to itemize, which is a bit more complicated than the EZ form you previously used. Whether you file a single or joint tax form, you get an automatic deduction for yourself. But when you itemize, you often make out better with a higher overall deduction.

Each year, the various deductions change, so it’s always good to keep your eye open around tax time for updates for the tax year. A quick Google search can give you some places to start. Even deductions that have been around for a long time can change on the specifics, so make sure you stay informed!

Here are a few deductions that are standard:

  • Mortgage interest paid in the tax year,
  • Points you paid on your mortgage,
  • Property taxes paid including any that were prepaid and listed on the settlement sheet when you closed on your home,
  • Energy efficient improvements (there are only specific items that this can be used on and can vary year to year),
  • Medical expenses more than 7.5% of the adjusted gross income (this one is scheduled to increase to around 10% in 2013, making it harder to meet)

As mentioned earlier, deductions can change each year. In past years you were able to deduct energy efficient home improvements such as adding insulation, or there were incentives for being a first time home buyer. You never know what other deductions may pop up, so it’s always worth saving receipts just in case!