You’d be surprised to find out how many homeowners aren’t aware of what their 2022 tax-deductible home improvements are. It can be confusing if you haven’t been up-to-date with the new tax rules. Although not every home improvement will qualify for a tax deduction, it’s still important for you to have a better understanding of what the main tax-deductible home improvements are.
First things first, you should understand that your improvement should be seen as a capital improvement as it increases the value of your home. In fact, this is how the IRS deems renovations such as heat pumps to qualify for a tax credit. To learn more about whether your improvements qualify or not, you should keep reading.
What Qualifies As a Home Improvement?
Did you know that not every home improvement that you undertake is deductible for tax purposes? This is why it’s essential for you to know which of these fall under the 2022 tax-deductible home improvements. To qualify, your home improvement should meet the following criteria:
It should add a substantial amount of value to your home
It should increase your home’s lifespan
Ensure that your home adapts to new uses.
It’s important for you to also understand that there is a significant distinction between a home improvement that qualifies for tax deductibles and ordinary home repairs that you need to undertake. To qualify as part of your 2022 tax-deductible home improvements, your project needs to increase the value or the initial tax basis of your home. Home repairs don’t make the cut because they’re a necessary part to keep your home functional and operational.
Examples of Home Improvements
When you plan to build a new deck, you hardly consider the tax implications that stem from your decision. After all, you just want to add a valuable space that you can use for your business needs. Yet, you can also deduct your improved deck as part of your business expenses.
According to the new tax rules, you can deduct the costs of your deck in one year depending on how much it costs and whether it’s a repair job or not. But, if it costs more than the threshold, then your deck should be treated as a home addition or improvement. This means that it will be treated as part of your home and it will depreciate over 39 years.
So, if you’ve paid for any building materials for the benefit of your business, you can talk to your tax lawyer to find out how much of it is deductible. However, you should remember that when it comes to certain home improvements such as a deck, you should prove that it’s a business need instead of a personal one.
2. Room Additions
The general rule of thumb is that any addition to your home is a tax deduction. The idea is that such an addition should increase the value of your home when it’s time to sell it. A room addition can even include a walk-in closet as long as it’s something that will ensure a return on investment in the future.
So, if you’re wondering if the extra room you’ve added will form part of your 2022 tax-deductible home improvements, you should rest assured that it will.
3. Any Energy-Efficient Improvements
The fact of the matter is that sustainable energy has become a major part of our lifestyle, and electrical companies can help you get there. If you want to ensure that your 2022 tax-deductible home improvements will qualify, make sure that you have made room for some sustainable upgrades. The most common electrical upgrades are the addition of solar panels.
How much you receive on your taxes once you’ve installed energy-efficient improvements is likely dependent on where you’ve placed them. This is why it’s best to speak to someone who has great knowledge of the most ideal way to conduct an electric panel upgrade. The main idea is to ensure that your home runs on more natural energy so that you can qualify for these 2022 tax-deductible home improvements.
These are some of the most energy-efficient upgrades that you should consider if you wish to receive tax deductions.
- Geothermal heat pumps
- Solar water heater installation
- Wind turbines for residential use
4. Home Office Updates
There’s no doubt that there are more people who work from home nowadays than there were five years ago. If you work from home, there’s a high chance that you require a working space within your home. Unfortunately, you can’t make any deductions to any investments that you make in your home office.
However, if you want to ensure that your home office updates are included in your 2022 tax-deductible home improvements, you need to prove that you use part of your home for work purposes. If you have to conduct any home office renovations, they will be eligible for tax deductions. You just need to ensure that you can prove that you have a legitimate business that qualifies for the tax credit.
In fact, there are additional improvements and repairs that you can make to the rest of your home that can be deducted partially. The fact that you can prove that you operate a business from your home is enough to qualify you for your 2022 tax-deductible home improvements. The main motivation that you can use is that your home is an essential element to ensure that your business remains a success.
5. Rental Property Improvements
As a landlord, it comes as no surprise that you’ll need to undertake renovations from time to time. This helps to ensure that your property remains desirable for potential tenants. The great news is that any improvement that you make to your rental property will be included in the 2022 tax-deductible home improvements.
Moreover, you don’t have to add over-the-top upgrades such as an insulated glass installation for it to be deductible. Rental property renovations differ from most tax-deductible renovations. As a result, you can even claim a full portion of your repair costs as long as they’re claimed within the year that you finish doing them.
The only thing that you need to prove is that the repairs are essential to ensure that your tenants have a livable space. It’s crucial for you to keep the costs within a reasonable amount so that they can be fully deductible. Additionally, when you rent out your home temporarily as a vacation rental, you can also deduct a proportion of your expenses for the days that you rent your home out.
6. Bathroom Improvements
You’d be surprised to find out how much changing your bathroom can increase the overall value of your home. The fact of the matter is that there are many bathroom trends that have become a huge part of home improvements. But, how can you know that your bathroom renovation fits the criteria for 2022 tax-deductible home improvements?
If your bathroom renovations include modifications that are suitable for handicapped people, such as a wet room, then you should know that it qualifies for a tax deduction. Most potential homebuyers look for specific modifications that provide a practical and modern look. Adding a wet room is also a good way to ensure that you prevent any risky slips and falls from your parents when they visit.
7. Home Expansion
Have you been thinking of expanding your home, but constantly worried about the costs of everything? You’re not alone. A home expansion requires adequate and thorough planning.
For instance, you need to have a flexible budget, understand your property lines, and find a reliable contractor. There’s a lot that goes into increasing the size and value of your home. Let’s say you need to find excavating services, chances are that there are certain rules regulating how this process takes place. You can have too much on your plate when you want to do a home expansion.
Fortunately, tax deductions aren’t part of these concerns. This is one of those guaranteed tax deductions because of the kind of value it adds to your home. A home expansion is one of those projects that should give you a return on investment by increasing your home’s resale value.
8. Certain Interior and Exterior Renovations
Did you know that there are certain interior renovations that qualify to fall under your 2022 tax-deductible home improvements? Before you know which ones are tax-deductible, you should also know the ones that aren’t. For example, you can’t claim taxes back on repainting your home or even buying new blinds.
But, you can always get tax deductions when you undertake some long-lasting interior renovations. The tax rule is that these improvements are categorized as a capital improvement plan (CIP). These include major renovations such as built-in appliances, flooring, and kitchen refurbishments.
There are certain exterior renovations that qualify for tax credits even though they’re not for business purposes. If you have to change your roof or shingles, you can get a portion of your costs back. Other tax-deductible exterior renovations can include doors, storm windows, hurricane inserts, and new siding.
9. Home Systems
As the world progresses and technology evolves, so does how your home systems function. In most cases, people opt for home systems that are more energy-efficient. Anytime you decide to call a plumbing service provider to change your septic system, the value of your home shoots up.
Any home system that aims to bring solutions for your needs has the potential to improve the quality of your home. These types of systems ensure that you gain the most return on your investment. Whether you’re a homeowner or looking for a new home to buy, you should consider a home system that propels your home into the future.
There are many types of insulation that you find out there. The main purpose of these materials is to lessen the transfer of heat into your home. This helps to create a home that uses less energy depending on the time of the year.
Let’s face it, everyone wants a well-insulated home. Choosing the best insulation is a great way to increase the value of your home. What’s better is that you can have your insulation costs to be part of your 2022 tax-deductible home improvements list.
Tax-Deductible Tips for Homeowners
Now that you’ve got an idea of what you can deduct from your home improvement taxes, you should use these tips to ensure that you stay clued-up on your tax credits.
- It’s important to keep a record of all the taxes that you’ve been paying on your property. The best way to do this is by keeping copies.
- You should keep the form that details how much interest you’ve paid on your home.
- Even though you can’t write off the expenses on certain home improvements, you can still add them to the purchase price of your home when you sell it. This helps you see the added value when you sell it.
- Keep a record of all the home improvements that you make.
- Make sure that you only use your home office space for the purpose of your business.
- You can’t make deductions on the total cost of any equipment that you add to your home for medical reasons.
In summary, if you’ve been planning to change a few details to make your home look more trendy, it’s essential to make sure that you understand how capital improvements are selected. Knowing how to distinguish between what is considered a valuable addition for the purposes of reselling your property and the required repairs is very crucial. Take for instance the much-needed HVAC replacement that has become hazardous in your home.
Even though you need to change the HVAC system, the fact that it’s a valuable system that should benefit the next person makes it a capital improvement, and it can be tax-deductible. Yet, if you were thinking of changing the color of your home, it wouldn’t be considered as an addition that increases the resale value of your home. It’s always best to follow this guide and to speak to a tax consultant to understand what the criteria are to gain tax credits within your area.