Tax-deductible home improvements
Also look for credit
details on the packaging. Most manufacturers provide energy ratings and many have
added labels alerting buyers that the item qualifies for one of the new tax credits.
forget to check on your state's energy tax breaks via the
Database of State Incentives
for Renewables & Efficiency. Many also offer tax incentives which might
be more generous than the federal credits, says Anne-Maire Fisher with CBIZ Accounting,
Tax & Advisory Services in Chicago.
Some residential modifications also can provide deductions
that could reduce a tax bill. Most of these, however, are in the medical area,
which could mean costly upfront expenses.
You can include as
medical expenses amounts you pay for special equipment installed in a home or
for home improvements when the main purpose is medical care for you or your spouse.
You can then deduct these amounts as long as you follow your doctor's orders and
the IRS's rules.
LeValley says the IRS has a "bright line"
standard: "Anything that increases the value of the home is going to offset
However, says Luscombe, "The IRS
on the whole has been getting more generous with medical deductions. And with
respect to the home, something that is helpful to a disabled person but doesn't
increase the long-term value of the home is likely to be able to help reduce your
If you need, for example, to add a chair lift
to get up and down the stairs, the IRS generally considers that a legitimate expense.
Other deductible projects that make a house more accessible for a handicapped
resident or individual with chronic medical problems are:
|Deductible improvements for handicapped access: |
doors and hallways|
counters and cabinets|
electrical outlets and fixtures|
railings, support bars and other bathroom modifications|
hardware on doors|
exterior landscape to ease access to the house|
addition to deducting the actual remodeling costs, you also can deduct the ongoing
expenses to maintain or operate any medically prescribed equipment.
If you do make changes to your home that add to
the property's value, you might still get some tax savings. "You really have
to look at how much it increases the value," says Fisher. "If the improvement
is more than the increase, you can deduct the excess."
offers a simple example: A person suffering from cystic fibrosis is told by physicians
to maintain a constant temperature and high humidity in the home. The homeowner
installs a central air conditioning unit costing $1,300, but it only increased
the value of the home by $800. In this case, the $500 excess is deductible as
a medical expense.