If you’ve been thinking about making some updates to your North Carolina or South Carolina residence, but you are concerned about the money involved in doing major home improvements, tax-deductible renovation projects might sound extremely appealing to you. “But, wait,” you’re probably thinking, “are tax-deductible remodeling jobs even real?”
They certainly are — and they might be the perfect balance between updating the look of your house and making sure you feel at-ease from a financial standpoint. Here, we break down some of the top tax-deductible home renovation projects you should be considering, no matter where in the Carolinas you reside.
Understanding the term “capital improvement”.
When you start seriously researching tax-deductible home improvements, one of the first terms you’re likely to see is “capital improvement”. This refers to nearly anything that is done to a property that increases the overall value of a home — things like adding a deck or patio, adding on living space, or even putting in a pool generally qualify. However, it is important to note that there are exceptions to every rule, so before you assume something is a capital improvement, it’s smart to talk to a tax expert.
Furthermore, be aware of the fact that general maintenance — even if it does improve your home — does not fall under the capital improvement category. If, for example, you replaced a non-functional toilet with a more expensive model, you would simply be keeping your house in basic working order, not adding a true improvement.
Renovations that qualify for tax deductions.
Harnessing alternative energy – Updating your home to run off of any form of alternative energy is generally tax deductible. You may also qualify for other tax bonuses and rebates. Some of the upgrades that would fall into this category include solar panels and taking advantage of wind energy in any way. It is important to be aware, however, that, at least in 2021, installing low-flow toilets and EnergyStar rated appliances will not qualify you for a federal tax deduction.
Medically necessary renovations – If someone in your household has a disability or disorder that requires you to remodel your home, you are likely to be able to deduct the expenses from your taxes. Widening doorways to accommodate a wheelchair, installing cabinets at a lower height for wheelchair access, adding a walk-in bathtub or shower, building outdoor access ramps, and having a stairlift installed are all forms of medically necessary renovations.
Home office updates – Particularly amid the COVID-19 pandemic, more people than ever are working 100% remotely. If you are now working from home and need a more efficient, functional home office space, you’re in luck! As long as the area is 100% dedicated to working — you cannot, for example, be working from a coffee table in your living room — any improvements you make will be tax deductible.
Hopefully this information will set you on the path of turning your house into the home you’ve always dreamed of!