If you’re planning home improvements in Birmingham, AL, you might wonder whether you could possibly qualify for a tax break. It’s likely that you’ve spent quite a bit of money on your home remodel or other improvements, which have raised the value of your home. Keep reading to find out how to ensure that your home improvement costs save you money on your taxes.
Home improvements vs. repairs
If you have made home improvements in Birmingham, AL, you will want to make sure and keep track of your expenses, because they could save you money on your taxes. You can add the cost of capital improvements, which is anything that adds value to your home, prolongs its life or adapts it to new uses, to your tax basis in the house, which is the amount that you can subtract from the sale price to determine the amount of profit.
This means that if you spend money building a deck, renovating your kitchen, adding an additional room to your home or any other typical home improvement, you can subtract this expense from the sale price of your home. Other things that would qualify as improvements are the addition of a swimming pool, a new roof or adding a new HVAC system. However, even small improvements can be added to the tax basis, such as installing storm windows, adding a home security system, installing an additional water heater and more. In fact, energy-saving home improvements in Birmingham, AL can also qualify.
Sometimes, the money we invest in our homes is used to keep things running the way they are supposed to and repair things that have broken, such as replacing a broken window, fixing a gutter or repainting chipped siding. In the case of repairs, these do not qualify as capital improvements, because they are merely restoring the home to its original working condition.
Making the most from your sale
Selling your home is the time you can benefit the most from your home improvements in Birmingham, AL and save the most money tax-wise, as well. If you’ve lived in and owned your home for at least two of the five years leading up to the sale of your home, all of your profit may be tax-free, meaning all the money you spend on home improvements and remodeling costs will return to you entirely.
The first $250,000 of profit on the sale of your principal residence is tax-free for single filers, and the first $500,000 of profit on the sale is tax-free for married couples who file joint returns. To figure the total amount of your profit, make sure you include the total of everything you paid for the home as well as the money you spent on improvements. Be sure to keep all financial records related to your home, including receipts, to guarantee you have the accurate numbers.
If you’re looking for a reliable, affordable contractor for help with home improvements in Birmingham, AL, look no further than Metro Contractors Inc. We have three decades of experience and perform nearly every remodeling service imaginable. Give us a call today to see what we can do for you!
Categorised in: Home Improvement
This post was written by Writer