can you deduct home improvements from your taxes? what form do you use with 1040?

Question

We built a home in 06 and did some home improvements after we moved in. I wonder if we can also deduct some of the fees like construction fees, origination fees, appraisal.. etc.We may just have to ask a prof to do our taxes. I did our 1040 with no problems(have not filed it yet) but I didn't see any part there where I can deduct home improvements like I heard some people say. We live in OH if it's of any significance to those who have an answer. Thanks.

Answer 1

Not all home improvements are beneficial as far as taxes are concerned, but starting in TY06 and again for TY07, the Fed's are giving "energy credits" which help reduce your taxable income.

"A recent tax law change provides a tax credit to improve the energy efficiency of existing homes. The law provides a 10 percent credit for buying qualified energy efficiency improvements. To qualify, a component must meet or exceed the criteria established by the 2000 International Energy Conservation Code (including supplements) and must be installed in the taxpayer’s main home in the United States."

See below link for more information.

Answer 2

The interest you pay on the car loan is NOT Deductible. The fact that you made the payments from a HELOC doesn't make the interest deductible. What IS deductible is the interest on the HELOC itself. That is an itemized deduction and goes on schedule A. If you have a 1098 form, you include it on line 10 by adding it to any interest paid on the primary mortgage. If you don't have a 1098 form, then put in on line 11. The total amount of your itemized deductions (line 29 of schedule A) goes onto your 1040 on line 40. If your total itemized deductions are less than your standard deduction, then the software is going to take the standard deduction, you won't use scheudle A and you get no benefit from the tax deductible interest. NOTE: I said HELCO (Home equity line of credit) but it works the same on a HEL, (home equity loan). They're basically the same for tax purposes.

Answer 3

IF you take deductions and don't use the Standard Deductions amount for the size of your family, yes, there are SOME you can take. You use the Itemized Deductions form if you decide to go that way and have more deductions than the Standard that they give you.

You can take the interest deduction that you have paid on your construction loan and mortgage payments. You can take the property taxes off that you have paid. You can deduct the Origination Fee and Document Prep Fee from your closing (they call it prepaid interest).

You won't be able to deduct home improvements until you sell the home to reduce your capitol gains (if any).

Good Luck!

Answer 4

You would not be able to deduct them from your current year's tax return, federal or state. But save the receipts - when you sell you can probably add those costs to what you paid for the house before figuring your gain, so if you owe any taxes on the sale, they will be decreased.

Note that the IRS distinguishes between repairs and improvements. Repairs can't be added to the basis, just improvements.

Answer 5

The truth is if you are given a prescription for a hot tub from your physician, or need alterations to your home for wheel chair use, you can deduct them as a medical expenses on schedule A subject to the 7.5% AGI limit. Otherwise, you can take them if you sell your home as a part of the basis which is equal to the cost plus improvements if your sales price exceeds the homeowners exemption.

Answer 6

You can't deduct home improvements, but for 2006 you may be eligible for a tax credit if you installed certain energy efficient components. Check the instructions for IRS form 5695.

Answer 7

You can deduct the sales tax for the building supplies.

RB

Answer 8

There's no place to deduct home improvements simply because you can't deduct them. You add them to the cost basis of the house to reduce your gain at sale time.

You can also add non-prepaid closing costs to the basis.