|
By: Peter J. Mason
People who are considering doing some home improvement will
be intereseted to know that the money you spend in order to
complete your project is eligible for tax deduction. It is
very important to know exactly what you are doing in your
home improvement process, however, as home improvement is
different from home repair. In the case of the tax deduction,
home imporvement will qualify for the reduced rate, but home
repair will not. It is imperative to know the difference between
what constitutes repair and improvement.
SImply put, home improvement is an addition that will add
to the appearance and the quality of your house. Items that
fall under this category include things like kitchen remodeling,
adding a fence to your yard, adding a swimming pool, extending
a wing on your house and including a new room or two, building
a garge, adding a porch or deck, installing new insulation,
or upgrading heating and cooling systems. All of these upgrades
are considered to be capital expenses.
Home repair, on the other hand, is in a different category.
Home repair is a project that is undertaken in order to prevent
the decay of your property. It does not add value to the house,
instead it prevents the value from going down. This includes
things like repairing holes in the walls or broken windows.
These repairs correct a problem, and therefore are not considered
eligible for tax benefits.
Ther is a way, however, that you can include your home repairs
in your home improvement deduction. A clause in the act states
that if an area of the house in need of repair is in the same
area in which remodeling is taking place, the project undertaker
is allowed to claim teh entire project as an improvement.
Basically, if you are remodeling the kitchen, remember to
fix the leaks in the roof and then claim the repair as part
of the improvement.
Timing is definitely a factor when it comes to home improvement.
The best time to do some upgrades to your home will be when
interst rates are low. The lower rates mean that in the long
run, the person using a loan to finance their improvemets
will be able to spend less money. Refinancing is one way that
many people secure the money to spend on their project. Loans
secured in this way can be deducted in the same year as the
refinance as points. If the proceeds of the refinancing are
not used to improve a house, then points towards the improvement
can be deducted over the life of the loan. If a project only
uses a part of the loan that was taken out, then the deduction
is considered proportional, with the remainder being taken
off over the life of the mortgage. It is important to keep
in mind that the points which are not taken off by the time
the loan expires are usually deductible according to the percent
rate in the final year.
Improving your home, in the end, will always add value. It
is important in terms of saving some extra money that the
home owner is aware of what can be deducted and what cannot.
About The Author
Peter J. Wilson very often edits detailed articles on things
relating to cabinets and decorating. His work on kitchen remodeling
can be discovered on http://www.kitchen-cabinets-tips.com/kitchen-remodeling.html
and also other web sites.
|
