Besides the advantages of having a roof over your head and a backyard for your children or dogs to play in, there are also benefits to homeownership in the form of tax help when you file your return. There are two tax credits and tax deductions in particular that many filers don’t know about.
Tax Credit for Energy Efficiency
One recent credit that can be a big tax help to many homeowners is the federal Energy Efficiency Credit, available when you install energy-efficient equipment in your home.
For instance, you could install a new heating unit to replace a cranky furnace. When it comes time for some much-needed tax help, you can claim up to 30% of the purchase price of the new product as a tax credit on your return. The maximum amount you can claim for this credit is $1,500.
There are several qualifications that your new equipment must meet in order to be eligible for tax help through this credit. You must install it in your main home (not a vacation home or commercial property) and it must meet or exceed the criteria established by the 2000 International Energy Conservation Code.
Some types of equipment commonly claimed for this tax credit are solar panels, skylights, metal and asphalt roofing, central air conditioning and heating systems, solar-powered water heaters, and biomass fuel stoves. Keep in mind that this is not an exhaustive list. Consult a tax professional for additional tax help if you are unsure whether the equipment you are planning to install qualifies for the credit.
The Tax Incentives Assistance Project (TIAP) was created to help consumers understand how to make use of federal income tax incentives for energy efficiency. TIAP is sponsored by a coalition of nonprofit groups, government agencies, and other organizations.
Also note that energy efficiency is rewarded on the local level as well, by various cities and states that offer energy credits to help lower your taxes.
Home Office Tax Deduction
Another useful form of tax help is designed for taxpayers who work from home. Whether you are self-employed or an employee who uses a portion of their home for business, the federal home office tax deduction allows you to deduct the costs related to your work.
For instance, purchasing additional homeowners insurance because you are an inventor who works from your garage would qualify for a tax deduction. Making repairs to your home because you operate a day care center and you want to provide an environment of maximum safety would also qualify.
Work-related depreciation of the value of your home qualifies as well, as long as you can assign a dollar amount to it. Some repairs that are extraneous to your property, such as sidewalk repairs and new utility hookups, may not qualify for this type of tax help.
Keep in mind that you can only claim costs for the part of the house you use for your work/business. However, your home does not have to be your primary place of business in order to be deductible. Consult a tax professional for more in-depth tax help regarding this deduction.