Improving Your Residence
When tax time rolls around, we often hear from clients that
they “did work to their home and that must be good for their taxes,
right?” Well…
Much of the improvement you do to your home is good from a
tax perspective, but you won’t see an immediate tax benefit (except for solar
discussed below). Major home
improvements like additions, new windows or exterior doors, new roof or siding,
HVAC, kitchen or bathroom updating, or landscaping will increase the cost basis
of your home. This is important when you
sell the home for a profit that exceeds the primary residence exclusion which
is currently $250,000 for single or married filers filing separately, and
$500,000 for married taxpayers filing jointly. In order to calculate your basis in the home when you sell, you should
keep your closing documents from the home’s original purchase, along with all
documentation relating to the improvements you make over the years.
Qualified energy improvements are still eligible for a
federal tax credit in 2018. The Bipartisan
Budget Act of 2018 signed into law in February 2018, extended the tax credit
for residential energy property for qualified solar electric and solar water
heating property through 2021. The
credit for 2018 is equal to 30% of costs including labor cost for installation.
Honorine M. Campisi, CPA
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