Uncle Sam gives homeowners a lot of breaks at tax time, as well as at the time of sale, especially if owners make improvements wisely.
“Homeowners get some of the sweetest tax breaks available,’ says Richard Roll, president of AHA, the American Homeowners Association. “All homeowners should take the time to create a personal strategy for making home improvements in a way that will not only benefit them at tax time, but also when they sell.”
For instance, did you know that things like a new roof or heating and cooling system, insulation, or a new garage, addition, deck or porch qualify as capital improvements, which can help reduce your capital gains tax bite by thousands of dollars, when you sell your house.
The list of what qualifies as a capital improvement is impressive, too. Even built-in appliances, fencing, landscaping, or a swimming pool can qualify. Receipts for payment and cancelled checks for work done, therefore, are valuable and should be saved in an organized way.
“The more a homeowner knows about what qualifies as a capital improvement, the better they’ll fare financially at the time of sale,” notes Roll.
Tax experts even recommend hanging onto receipts for work that doesn’t currently qualify, because by the time you do sell your house the list of qualifying improvements may have expanded to include the work you had done
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Homeowner qualifications for deductions
4 Your personal income, for the 2002 tax year, didn’t exceed $68,650. If you file jointly with your spouse the ceiling is $137,300.
4 If you exceed the IRS’ limits in either case, your deductions may be limited.
4 You purchased your home.
4 If you acquired your house as an inheritance, in a divorce settlement, as or gift, you’d be well-advised to seek professional assistance.
4 You used the home as collateral for a mortgage.
4 The home is a single-family dwelling, a townhouse, condo, mobile home, houseboat or a co-op unit.
4 Co-ops, however, have special rules, so be sure you understand the details or work with a tax a professional.
For more information on ways homeowners can maximize tax savings visit: www.ahamembership.com/aha_side_big_tax_breaks.cfm
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