[00:00:00] Janet: Hello everyone, and thank you for being with me today. I hope everyone had a wonderful holiday. I know I did. I had a chance to spend time with my husband and my son and my daughter, which lives in Florida. I also saw friends that came from Colorado to visit and spend some time in some warm weather.
So it was a lot of fun and. I am ready to get back to work and continue to record episodes in 2023. And so today I wanted to start this episode talking about tax deductions and if home improvement can be deducted from your taxes. Well, yes they can. And as we all know, tax season is around the corner and we can all benefit from tax cuts during a period of inflation.
But did you [00:01:00] know that home improvements can add value and increase the enjoyment of your home? Yes. And fortunately, some of these home improvements may actually qualify for tax deductions or credits that will reduce your overall tax. To take advantage of these benefits on your next tax return, it is important to understand which types of home improvements are eligible and how to document them properly.
So some home improvements may be eligible. Generally, those are the ones that fall under increasing the value of your home or a home improvement that will extend its life quality. Some examples are repairs and replacements to roofs, HVAC systems, windows and doors. Additionally, energy efficient upgrades such as insulation or solar panel.
May [00:02:00] also qualify for a tax credit on your primary residence or rental property. So now I'm going to go into the three different categories under which tax benefits are provided. Four. So the first one is capital improvements. The second is, Efficient improvements. And the third is home improvements related to medical care and medical expenses.
So I'm going to go into capital improvements first and explain what that is for those of you who may not know. So capital improvements are investments made to improve the value of an asset over its useful. These investments may include repairs, replacements, and gen renovations that increase in assets, physical or functional value.
Capital improvements can be made to [00:03:00] any property, such as a home or business building, land, vehicles or equipment. Some examples, as I mentioned earlier, are new roofs business repairs, remodeling. Improved heating and cooling systems, water heaters, kitchen upgrades, installing a swimming pool or other outdoor recreational structures and adding a home security system.
Capital improvements also apply to software and intellectual property, so capital improvements have several. Including increasing the value of an asset, enhancing security or safety, improving efficiency and productivity, lowering operating costs, improving the aesthetic appeal of a property or asset, lengthening the [00:04:00] useful life of the asset, and building equity in the.
So it's an important way of maintaining your property or asset and increase its value over time. However, it's important to keep in mind that these investments come with costs, such as legal fees, taxes, permits, or labor charges. So make sure that you do your research and budget carefully before you undertake this job.
So, Next we're gonna talk about what are energy efficient improvements. So these are improvements that generally are made to a home or a business that reduce energy consumption, improve indoor air quality, and save money in the long run. These upgrades can range from small tasks such as using LED light bulbs or installing programmable thermostats to larger [00:05:00] projects like window replacement or insullation..
Installation. All of these have been proven to be cost effective as they can reduce your energy bill while also increasing the value of your home or. So one example is installing solar panels. The type of improvements you should consider depends on the specific area where you live, as well as the condition of your current home or building.
It is important to assess both local and national codes and regulations in order to make sure that the improvements you make are up to. Additionally, it is important to ensure that the materials used meet all of the necessary requirements and standards in order to maximize their energy efficiency. So some of these examples are upgrading appliances such as refrigerators, wa washing machines, to an energy [00:06:00] efficient model.
All right, so now we are going to go into, Improvements that deal with medical expenses and making changes to your home due to medical care. So there are several home improvement projects and home repairs that may qualify for tax deductions if they are related to medical purposes. These include installing ramp.
Widening doorways and making structural changes to the home in order to accommodate a disability or an illness. In some cases, these improvements can also be used to improve safety or security in the home. So, for example, adding a security system to your home can be considered to fall under this tax benefit.
In addition, you may be able to deduct the [00:07:00] cost of improvements that are necessary for medical care. This includes installing items as I said earlier, such as wrap ramps and lifts, and other equipment used to provide support or treatment.
Alright. If you make any changes to your home in order to accommodate a person with a disability or illness, you can also take advantage of the energy efficiency tax credits. So this includes, again, installing is. Installing energy efficient appliances, windows, and other items that make the home more comfortable for individuals with special needs.
For example, if you have someone that has a spinal cord injury, they will have to have the home be at a certain. Temperature all of the time because they're at risk for developing a [00:08:00] condition that's called autonomic disreflexia. So if it gets too hot or if it gets too cold, but especially if it gets too hot then their whole system can really suffer and it can even result in death.
So that would be a modification or an improvement that would. Covered under tax benefits. So other items that will be covered include certain medical supplies and equipment used in the home. So these are things like wheelchairs, walkers, hearing aids, and other items that are necessary to provide medical care to your family member.
Another type of home improvement that may be tax deduct. Is any changes made specifically to accommodate medical equipment such as oxygen tanks, wheelchairs, and other devices? For [00:09:00] example, if you have a Hoyer lift that would be another medical equipment that would be covered. This may also include installation of special wiring and outlets.
Or the construction of a room to house medical equipment. While there may be some limitations and qualifications for these deductions, They can provide a way to reduce your overall tax liability while also helping to improve the quality of life of those who are in need of special care at home. But remember, I'll always consult with a tax professional before you start any home improvements and make sure that you are going to receive the tax benefit that you are planning for.
So these are just some categories where you can receive a tax benefit. Now, people also ask, can you claim new flooring on your taxes? Well, in general, installing new flooring is not a medical expense and therefore would not be eligible for tax deductions. However, if you install new flooring due to some medical condition or [00:10:00] disability, let's say that you have a family member that suffers a stroke and the right side of their body or the left side of their body.
Isn't working proper properly. So they have hemiplegia and you have to have a Hoyer lift in order to transfer them from their bed to a wheelchair. Well, if you have carpeting, especially if you have high pile carpeting, it's going to be very difficult to move that Hoyer lift across the floor. So in that case, you would need flooring that were smooth, such as luxury vinyl plank, or hardwood flooring or tile.
In order to be able to move the Hoyer lift easily across the floor, cuz the Hoyer lift, you know, has its own weight and plus you add the weight of the person, then it's gonna be quite difficult to move that across carpeting. So that would be an [00:11:00] example where that would qualify as a medical expense.
So what home expenses are tax deductible in 2022? Well, some of the common home expenses that may be tax deductible are, as I said earlier, energy efficient, home improvements. Mortgage interest deduction up to 750,000 of the interest you paid on your mortgage can be deducted from your taxable income real estate taxes.
You can deduct any real estate taxes that you paid during that tax year. Home office deduction. If you use a portion of your home for business purposes, then you may be able to deduct a portion of your expenses such as rent or utilities, home insurance. The premiums you paid during the tax year on your homeowner's insurance can be deducted from your taxable.
Property [00:12:00] taxes. If you pay any property taxes, then those are also deductible mortgage points. When you buy a house, you may pay what are called mortgage points in order to reduce your interest rate. These can be deducted from your taxable income as well. Home improvements. If you made any home improvements during your home, to your home during the tax year, then these expenses can be deductible depending on the type of home improvement that was made.
And lastly, moving expenses. If you moved during the tax year, furry job, then certain expenses related to your move may be deductible from your taxable. So how do you use a home equity loan to make home improvements? Well, first of all, what is a home equity loan? Well, a home equity loan, first of all, is an ideal way to finance home improvement projects.
The loan amount is based on the difference between the value of your home. And the [00:13:00] outstanding balance of your primary mortgage, giving you access to funds for renovations or repairs. The process is simple and straightforward. It begins with a free application process followed by approval from a lender and disbursement of the loan proceeds.
So how to get a home equity loan? Well, first you get pre-qualified. I suggest you shop around. Also understand the fees that come with this loan. Know your credit score, calculate your interest rate, and look for other options that are available to you. So what about home improvements that are tax deductible when you wanna sell your.
Well, the IRS offers certain incentives for those who are selling their homes. These typically fall into two categories, capital [00:14:00] improvements and home office expenses. So, as I said earlier, capital improvements include things as adding a new room or replacing a roof or your HVAC system. Home office expenses can include things like setting up an area for business purposes, purchasing a computer, or supplies to use in the office, or even hiring someone to help with administrative tasks.
So it's important to note that there are limits on the amount of capital improvements and home office expenses that can be deducted when it comes to selling a house. So as always, it is best to consult a tax professional or an accountant before making any major changes or improvements to ensure that these tax deductions will be accepted and applied correctly.
So this. The end of our episode, but I wanted to mention that if you are [00:15:00] considering making home improvements, please hire a certified Aging in place specialist so that they can help you make the right decisions for your, for yourself and for your family, and help you make modifications that are going to work for you today and also work for you five or 10 years from.
Again, thank you for listening. Thank you for spending time with me.