What kind of construction that I've done to my house can I use to reduce my taxes?

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tmoney
tmoney Member Newcomer
edited January 15 in Credits/Deductions

Is it only eco friendly or can something as insulating the basement help?

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Answers

  • Taxlady06
    Taxlady06 FreeTaxUSA Agent
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    Currently the only deductions for improvements to your main home are for energy-efficiency and include the following:
    -Energy-saving exterior doors, windows, insulation
    -Solar energy systems
    -Wind energy systems
    -Geothermal heat pump, fuel cells

    The easiest way to know if a purchase meets the energy efficiency criteria is if the manufacturer has a certification statement included in the packaging or a certificate that can be downloaded from the company website where it proves that the material you bought qualifies for the credit. Keep the manufacturer's certification document with your tax records.

    If you simply remodeled your home, these costs are not deductible. These costs do, however, increase your cost basis. Keep records of your costs. When the home is sold, you can increase your basis by these costs to reduce any taxable gain.

  • KeriC
    KeriC FreeTaxUSA Agent
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    You will want to confirm on energy.gov whether or not a specific energy-efficient home improvement is tax deductible. In general, the following are qualified expenses as long as they meet the energy guidelines.

    • Exterior doors, windows, skylights, and insulation materials
    • Central air conditioners, water heaters, furnaces, boilers and heat pumps
    • Biomass stoves and boilers
    • Home energy audits

    Source: https://www.irs.gov/credits-deductions/home-energy-tax-credits

    Because insulation in your basement would be an energy-saving improvement, it should be eligible for the Energy Efficient Home Improvement Credit. You may also find additional details for IRS requirements here.

  • BenjaminS
    BenjaminS FreeTaxUSA Agent
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    If improvements are made on a main home (not rented out to others) then the costs of the improvements are not deductible. They will raise the basis of the home when the property is sold though.

  • JPRANGER
    JPRANGER Member Newcomer
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    @BenjaminS

    This is what the IRS says (emphasis mine) at: https://www.irs.gov/credits-deductions/energy-efficient-home-improvement-credit

    If you make qualified energy-efficient improvements to YOUR home after Jan. 1, 2023, you may qualify for a tax credit up to $3,200. You can claim the credit for improvements made through 2032.