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 ‘Swimming Pool’
Tax Deduction is Only Possible with Home Improvements, Not Home Repairs
March 19th, 2010Personal Loans for Home Improvement at Low Interest
December 26th, 2009You now have a choice to revamp your house, so why stay in the same old house. Add a new look to your house and make permanent changes in the interiors or add up to the value of the equity by making your house look better. Definitely, your house will have a greater market value with its modifications carried out. Redecoration, painting your house for your daughter’s or sons wedding, repairs and renovation, adding up new rooms, creating your kids room, a swimming pool or a basket ball court will be covered under a home improvement loan. It can also be complete home-makeovers, addition of an entire storey to your home, a new sit-out, an added garden or backyard, and others.
You can carry out these changes if you have saved enough over the years and have adequate financial reserves to rely on. If you’ve thought that this is the only way to carry out your house refurbishments, then, think again, online lenders have home improvement loans specially designed for this purpose. But, on one condition, wherein a lender is reassured that there is in fact some equity left in your property and that any remortgage or personal loans already outstanding will not interfere with any new arrangement made by them if they agree to a loan.
Take good care, to see to it that you don’t borrow more than what you can afford to pay back as monthly installments or the EMI. Even, the simplest repairs or renovations you undertake can make a permanent modification to your property. The loan amount you are able to borrow using a secured loan will depend on the value of your home. Work out your monthly earnings and how much you can afford in the form of loan repayments, as your loan should not be a cause for any financial hardship, restrict it to cover just essential maintenance. Don’t get jittery like the other home owners about the huge repayments, stretch only as much as you can pay back, to avoid any fear of non repayment and face the consequences of it. Avoid excessive costs of repair which may cause inconvenience for the years to come. Plan your budget wisely and opt out for the right amount of loan. Compare different home improvement loan lenders online and obtain personal loans for home improvement at low interest. A little time spent online in comparision, can save a great deal on money. Think smart! Be a winner, reach out to an expert for help!
By: Kirthy Shetty
