Saturday, July 8, 2006

Tax Credits on House Repairs

Tax Credits on House Repairs

Being a homeowner comes with a to-do list. Eventually all homes will need repairs, some minor and some major. Typically, home repairs do not qualify for a tax deduction the year you make them, but you can receive a deduction for buying certain materials or taking out a loan. Even if your repair does not qualify for a deduction this year, it may when you sell your house.

Repairs Vs. Improvements

    Simple home repairs, such as repairing a broken storm gutter or repainting the interior do not generally qualify for a deduction. If you make repairs that improve your home, such as replacing the roof, the cost will reduce your tax liability when you sell the house. You can add capital improvements to the tax basis of your house. When you sell your house, you can deduct your tax basis from the selling price to determine your profit.

Using a Home Repair Loan

    If you take out a home improvement loan to make repairs that qualify as capital improvements, you can deduct the cost of paying the interest on your taxes. For example, if you take out a home improvement loan to replace the roof on your house, you can deduct the interest you paid toward the loan for that tax year. You cannot use this deduction if you only make minor repairs to your home. The repairs must improve the value of your house.

Using a Home Equity Loan

    If you take out a home equity loan or line of credit to make repairs, you can deduct the cost of paying the interest. You can use a home equity loan to make any repairs, small or large. For example, if you open a home equity line of credit and use the money to repaint your house, update your old flooring or repair broken appliances, you can deduct the cost of paying interest on the loan.

Tips

    Certain Energy Star-qualified appliances and construction materials qualify for a tax credit. You can receive a credit for purchasing energy-efficient installation materials, skylights, windows and doors. You can also receive a credit for purchasing certain appliances, such as central air-conditioning units, water heaters and heat pumps. The amount of tax credit you can receive depends on the type of materials and appliances you purchase.

0 comments:

Post a Comment