That being said, you will more than likely need to put a bit of money into the property to see that overall value increase. Although this tends to be a really tough decision to make, as the return on investment does not happen overnight, there are ways to offset the home improvement costs in the form of tax write-offs.
Today we are going to delve into a few of those write-offs you can take advantage of.
Use A Portion of Your Home as a “Home Office”
If you work from home, turning a room into a home office can provide a tremendous tax relief. To qualify, you must be able to show the IRS two things:
- Regular and exclusive use of the room for business purposes
- Use as the principal place of business (i.e., that you meet clients or customers there)
If you can do that, a percentage of the costs incurred while upgrading the room can be written off as a business expense. You are allowed to deduct $5 worth of costs from every square foot in the room, but you are limited to $1,500. Keep in mind that the IRS will require extensive personal records, including proof of expenses and IRS Form 8829.
Take advantage of Energy Star Tax Credits
Thinking about installing new windows on your property? Chances are you have been looking into using Energy Star certified products in order to save on heating and A/C costs. Most don’t realize that the savings don’t stop there!
This year the IRS is offering an Energy Star tax credit, as thanks for helping to reduce the overall greenhouse gas emissions. Qualifying is relatively easy; all you need to do is prove that you installed a brand new Energy Star qualified window or skylight between January 1st, 2011 and December 31st, 2016, and the government will offer you a tax credit of 10% of the cost (up to $200). This tax credit will only cover the cost of the window itself, and excludes things like labor or installation.
Rent Out a Room/Section of Your Home
An excellent way to squeeze a few extra bucks out of your property is to rent out a room or portion of the home. While you will have to report those earnings to the IRS and pay income tax on it, but there are deductions you can take advantage of to somewhat offset the extra taxes.
For example, all upgrades to the room (like replacing carpet or window) can be deducted in full, as well as any extra homeowners’ insurance premiums associated to the rental. Expenses associated to the entire home may go up as a result of the rental (i.e., repairs to the roof, utilities, security system costs, etc.), but you can still deduct a portion of those costs. The easiest way to figure out that portion is to look at the size of the room you are renting and size of the home overall.
For example, if the room you are renting out is 200 square feet and the size of your home is 1,400 square feet, you have 14.28% of your home rented out. That means you can deduct about 15% of the costs split between your personal use and rental use.
- Cross-cut paper shredder with 8-sheet capacity; destroys credit cards (one at a time)
- Shreds paper into strips measuring 3/16"x 1-27/32", meeting security level P3 standards
- CONFIDENT STYLE: This durable L-shaped computer desk unifies a firm metal frame with an appealing rustic brown tabletop...
- A PERFECT FIT: Both sides of this space-saving study desk are the same length, making it easy to fit into almost any...
Last update on 2020-02-16 / Affiliate links / Images from Amazon Product Advertising API