When you are considering doing some work on your property, you need to consider whether it will fall under the category of home repair, or home improvement. This is a crucial distinction because home improvements are tax deductible, whereas home repairs are not.
So what constitutes home improvement? In its basic form, it is any task that will add to the quality and therefore the value of your home. Such tasks would include putting up a new fence, installing a new driveway, complete kitchen remodeling, extending your property to add a room, building a swimming pool or garage, constructing a deck or porch, adding insulation, installing new heating or air conditioning systems, replacing the roof, or re-landscaping your yard. All of these tasks will require capital expenditure, but will add to the value of your property and increase the equity in your home.
Home repair, on the other hand, is a task undertaken to prevent the decline or decay of your property, and a subsequent drop in value. The task is necessary to maintain your home to its existing standard, without making significant additions or improvements. Home repairs include repainting or decorating, fixing leaks or breakages, repairing cabinets and replacing fixtures that no longer function.
Generally expenditure on home repairs cannot be used to obtain a tax benefit. However, there is a possibility that you could incorporate your repairs into a home improvement project and still gain a financial advantage. If you were undertaking a large remodeling task, you would be doing a lot to improve your property and increasing the value, and if you were doing some repairs as part of this project, expenditure for the whole task could be tax deductible. In other words, next time you plan to add an extra room to your home, be sure to fix the leaky roof at the same time!
If you require refinancing to pay for your home improvements, you may be advised to wait for a drop in interest rates. If you obtain refinance and use the capital for home improvements, you will be able to deduct the loan points in that same financial year. If you choose not to use the capital to pay for home improvements, the points will be deducted over the term of the loan. If you use only a portion of the loan for home improvements, then your possible deduction is also proportional. The rest of the points will be deducted during the term of the loan. Any points not deducted by the final payoff date of the loan will be cent per cent deductible in that year.
Before you start work on your home, you really need to understand the various distinctions that allow or disallow tax deduction. You can then make a decision whether it would be financially prudent to expand your project beyond simple repairs to increase the value of your property and ensure your expenditure is tax deductible.
By: Peter J. Wilson
Posts Tagged ‘Kitchen Remodeling’
Tax Deduction is Only Possible with Home Improvements, Not Home Repairs
March 19th, 2010Home Improvements to Increase Home Value – Basic Information to Know
February 7th, 2010Real estate is a fast-paced industry yet the booming market for this sector is definitely a tough and competitive entity to deal with. However for those who are brave enough to venture into real estate, through all the difficulties, the reward is surely promising and inevitably remarkable. One of the very first things that home sellers should attend to would be making sure that their properties have certain edge amidst the myriads of others set in the real estate listings. There are actually several things to do this and the most prominent would be boosting the home value of the house they are selling.
What are the ways to improve home value?
Now more than ever, buyers and potential homeowners are vehemently careful and conscientious in buying or investing their money in real estate. Hard-earned money in times of economic uncertainties is definitely something worth investing in great properties or ventures thus you as a seller must make sure that your property is something that buyers should be putting on top of their list. One very sure step to do this is to make the necessary home improvements in your property that is equivocal to home value. So how are you going to make home improvements that would effectively generate positive results?
What are the different home improvements you should choose?
To make certain upgrades in your home you must basically have a sound discretion and judgment on the kind or particular parts of your house that needs the improvement in order to get the greatest return.
Here is a list of some of the important home improvements you need to consider.
• Kitchen remodeling. This is a very salient area of your house since this is the room where the family spends much of their time interacting with each other. Most of remodeled kitchen has a return-on-investment rate from 80%-93% which is equivalent to an average expense of $15,000 and more. To appraise your kitchen area you may start with the materials, fixtures and appliances in order to have spacious accommodation and thus increase its functionality.
• Bathroom remodeling. Renovating your bathroom could actually give you 85%-90% return of your investment that costs approximately $10,000 and up. Providing two or more bathrooms in the house is a good idea as well as improving some features like tile floors, sinks, bath fixtures and faucets.
• Wall paneling. This is another good renovation idea which you could even conveniently do on your own. This is great in improving your home value because the exterior quality and appearance of your home is a great way to attract and make buyers consider your property. There could even be multitudes of designs you can choose from which you could customize for your prospective buyer’s preference.
Home improvement definitely enhances your home value and that is quite proven in the real estate trend. To be effective and see greater results for this kind of endeavor, it is important that you make proper calculations so that the cost perfectly matches the return-on-investment you would benefit from.
Granite Countertops Still Top List of Home Improvements
November 26th, 2009(NewsUSA) – Despite the sputtering economy, consumer spending on home renovation remains healthy. Across the nation, homeowners are investing in home remodeling projects – especially kitchen makeovers – either to make their homes more appealing to buyers or more comfortable and enjoyable while they ride out the housing slump.
And one of the most popular home improvements is, once again, granite countertops.
A recent study of 10,000 consumers, conducted by the Research Institute for Cooking and Kitchen Intelligence, found that kitchen renovations remain at the top of the list for consumers seeking to add value to their homes. When the study asked homeowners, “If you were changing your kitchen now and had no budget constraints, what improvement would you make?” granite countertops were among the kitchen features they coveted most.
Many consumers are tightening their belts but remain eager for granite countertops, according to Garis Distelhorst, executive vice president of the Marble Institute of America, the nation’s leading natural stone association.
“Historically, consumers recognize that granite countertops enhance the value of a home in ways few other improvements can,” said Distelhorst. “No other countertop surface can measure up to granite in terms of practicality, timeless beauty, durability and safety. This natural stone has held its value in ways more trendy materials have not.”
Consumers continue to invest confidently in kitchen makeovers because the projects typically increase the resale value of their homes. In the last five years, kitchen remodeling projects have generally returned 80 to 85 percent of consumers’ investments, according to the “Cost versus Value Report” from Remodeling magazine.
Because kitchen renovations increase resale values, experts agree that if consumers can only afford to renovate one room in their homes, it should be the kitchen. In fact, an all-new kitchen “that looks great and is fun to work in” was the top priority of 2,200 home enthusiasts surveyed recently by Better Homes and Gardens magazine.
“What we’ve discovered is that the home continues to be our emotional center and the sweet spot of everyday life,” said Gayle Butler, Better Home’s editor in chief. “Economic uncertainty aside, we won’t stop spending, improving and dreaming.”
By: Ron Roberts
