2017 Home Improvement Deductions: Know Before Filing Your Taxes

[Click here for 2018 Home Remodeling Tax Deductions] 

You may have heard that you can claim federal tax deductions on home improvements. While you can’t claim home improvement tax deductions from 2017 on improvements that are made to increase your home’s value, home improvements made for other reasons may be used to reduce your taxes. Today, we’ll walk you through the ways in which you can claim and qualify your Atlanta, GA, home improvements toward your taxes.

Repairs vs. Improvements

It’s important to begin by distinguishing between repairs and improvements. Home repairs, such as fixing a gutter, repaving a driveway, etc. cannot be deducted from your taxes. Home improvements that fall into the categories listed below, however, may be claimed.

Health-Related Improvements

Health-related home improvements may be deducted from your income, provided that they are truly made for medical reasons and not for aesthetic reasons or to increase your home’s value. For instance, widening doorways, lowering countertops, installing ramps, or any other changes made to make your home more wheelchair-accessible may be deducted since these alterations are medically necessary.

Energy Conservation Improvements

There are also tax incentives in place for home improvements that conserve energy. For instance, you can receive a federal tax credit of 30% of the cost of solar water heaters installed in your home remodel. This break includes the cost of the water heater itself as well as the cost of its installation. These credits are good through 2019, and then they are reduced each year through the end of 2021. Better still, these credits may be applied to vacation/second home improvements as well as primary residences.

(Note that tax credits for energy conservation must be applied in the same year that any given unit is installed and placed in service. A Manufacturer Certification Statement must be on record. Additionally, whereas in previous years credits for wind turbines, geothermal heat pumps, and fuel cells could also be claimed, only solar energy systems are eligible for home improvement tax deductions in 2017.)

Using Your Mortgage to Finance Improvements at Purchase Time

If you’re just now purchasing a home that you know you’ll want to make improvements on in the future, you can save money by taking out a mortgage that includes extra money for home renovations. While it doesn’t sound beneficial to increase your mortgage, doing so enables you to deduct the interest on the extra amount from your income.

How to Avoid Paying Capital Gains on Home Appreciation at Selling Time

Finally, your home may qualify for a home sale exemption. If you sell your primary residence for a profit of $250,000 or less (if you file as a single) or $500,000 or less (if you file as married/jointly), then you do not have to pay capital gains on appreciation. Home renovations increase your home basis, so they can reduce what’s counted as home sale profit, limiting the taxable portion of your sale price. Visit TurboTax for more information.

2024 Atlanta Remodeling Cost Guide (variant A)