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What Home Improvements Are Tax Deductible 2016

Are you considering making some improvements to your home this year? Did you know that some of these improvements may be tax deductible? In 2016, homeowners have the opportunity to save money on their taxes by taking advantage of several tax deductions related to home improvements. Read on to find out which home improvements are tax deductible in 2016.

1. Energy-efficient upgrades: Making energy-efficient improvements, such as installing solar panels, energy-efficient windows, or a geothermal heat pump, may qualify for a tax credit. The federal government offers the Residential Energy Efficient Property Credit, which can save you up to 30% of the cost of these improvements.

2. Home office expenses: If you use a portion of your home exclusively for business purposes, you may be able to deduct some of the expenses related to that space. This includes improvements made to the home office area, such as painting, flooring, and furniture.

3. Medical upgrades: If you make home improvements for medical reasons, such as installing grab bars, ramps, or widening doorways for wheelchair accessibility, you may be able to deduct these expenses as medical expenses.

4. Capital improvements: Certain home improvements that increase the value of your property can be added to your home’s cost basis, which can reduce your taxable capital gain when you sell your home. Examples of capital improvements include adding a swimming pool, building an additional room, or renovating the kitchen.

5. Home improvement loans: The interest paid on home improvement loans may be tax deductible. This applies to loans used to make substantial improvements to your home, not for general maintenance or repairs.

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6. Moving expenses: If you make home improvements as a result of a job relocation, you may be able to deduct some of these expenses. However, there are specific criteria that must be met for this deduction.

7. Disaster-related repairs: If your home was damaged by a natural disaster, such as a hurricane or flood, you may be able to deduct the cost of repairs or improvements made to restore your home to its pre-disaster condition.

8. Energy-efficient appliance upgrades: In addition to the energy-efficient improvements mentioned earlier, purchasing energy-efficient appliances, such as refrigerators or water heaters, may also qualify for a tax credit.

9. Home improvement grants: Some homeowners may qualify for government grants to make certain home improvements, such as those related to energy efficiency or accessibility. These grants are typically tax-free and do not need to be repaid.

10. Rental property improvements: If you own a rental property, you can deduct the cost of improvements made to that property as a business expense. This includes repairs, renovations, and upgrades that are necessary to maintain or improve the property’s condition.

11. Home improvements for selling purposes: While not directly tax deductible, making certain home improvements before selling your home can increase its value and result in a higher selling price. This can indirectly reduce your taxable gain when you sell the property.

FAQs:

1. Can I deduct the cost of replacing my roof?
No, roof replacements are considered a general maintenance expense and are not tax deductible.

2. Can I deduct the cost of repainting the exterior of my home?
No, repainting is considered a regular maintenance expense and is not tax deductible.

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3. Can I deduct the cost of adding a home security system?
No, adding a home security system is not tax deductible unless it is specifically required for medical reasons.

4. Can I deduct the cost of installing a swimming pool?
Yes, adding a swimming pool is considered a capital improvement and can be added to your home’s cost basis.

5. Can I deduct the cost of renovating my kitchen?
Yes, kitchen renovations that increase the value of your home can be added to your home’s cost basis.

6. Can I deduct the interest on a home improvement loan?
Yes, the interest paid on home improvement loans used for substantial improvements may be tax deductible.

7. Can I deduct the cost of installing solar panels?
Yes, installing solar panels may qualify for the Residential Energy Efficient Property Credit, saving you up to 30% of the cost.

8. Can I deduct the cost of widening doorways for wheelchair accessibility?
Yes, home improvements made for medical reasons, such as widening doorways, may be tax deductible as medical expenses.

9. Can I deduct the cost of repairing my home after a flood?
Yes, if your home was damaged by a natural disaster, you may be able to deduct the cost of repairs or improvements.

10. Can I deduct the cost of adding a home office?
Yes, improvements made to a home office area, such as painting or flooring, may be tax deductible if used exclusively for business purposes.

11. Can I deduct the cost of adding energy-efficient appliances?
Yes, purchasing energy-efficient appliances may qualify for a tax credit.

It’s important to consult with a tax professional or financial advisor to understand the specific requirements and limitations of these tax deductions. Taking advantage of these deductions can help homeowners save money and make their home improvements more affordable.
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