Learn what home upgrades may be tax deductible
One perk of homeownership is the potential tax deduction on your income tax return for annual real estate taxes. In addition to a potential deduction for real estate taxes, the IRS states that in most cases, “you can deduct all of your home mortgage interest.¹" However, keep in mind that real estate taxes, income taxes and sales taxes are limited to a $10k total deduction.
This means that you could receive tax deductions equal to the amount of mortgage interest payments you have paid. As with all potential tax deductions, however, you will need to consult with your personal tax advisor to determine whether you are eligible for certain income tax return deductions.
Does the home mortgage interest tax deduction apply to manufactured homes? Yes, indeed. The IRS says that “home mortgage interest is any interest you pay on a loan secured by your home¹.” If your home loan is secured by your manufactured home, you may be able to deduct your mortgage interest payments from your federal income taxes. A home loan is secured by a home when the home is used as collateral with a lender to secure the lender against a loan loss. If the loan is not paid, the lender can repossess or foreclose upon the home that was used as collateral.
You may also be eligible for other tax deductions and credits with homeownership, so read on to learn about the other perks of owning a home and making home upgrades!
What is a mortgage point?
First, you need to understand what a mortgage point is. A mortgage point is 1 percent of your loan amount. Often, borrowers pay points up front to the lender in exchange for lower mortgage rates. Basically, you pre-pay interest to lower your interest rate and payments over time which can help you save money².
Are upgrades in manufactured homes tax deductible?
You can get tax deductions for some home improvements if your home is permanently affixed to land. In some cases, tax deductions may be available for the cost of home improvements, but typically the deductions cannot be taken until the year that the home is sold.
If you’ve taken out a home improvement loan for your home, you can also deduct points paid on a home improvement loan in the year those points were paid as long as you meet six qualifying tests the IRS has in place. These six requirements include the home improvement loan being secured by your main home, which generally includes manufactured home loans, and you use a cash method of accounting on your tax reporting method.
Get Tax Breaks on Certain Green Home Improvements: Solar Updates
You can be eligible for federal tax credits for qualifying solar energy systems. This tax credit is available for existing homes or new homes, so whether you want to update your current manufactured home or are looking to purchase a new manufactured home, you can outfit your manufactured home with a solar energy system and save money over time with lower energy bills.
The tax credit for installing a solar energy system in your home is 30% of the cost of the solar energy system and installation with no upper limit. The 30% credit lasts until the end of 2019. It is a 26% tax credit for tax year 2020 and a 22% tax credit for tax year 2021.
The two solar energy systems that qualify are:
Deduct Taxes for Medical Home Improvements
If you make home medical improvements for someone in your home with a disability, you may qualify for tax deductions. The tax deductions must be itemized and cost more than 10% of your adjusted gross annual income. Some qualifying medical home improvements include:
Other State Programs and Incentives
Depending on the tax laws of the state in which your home is located, you may be able to take advantage of tax deduction or tax credit programs for different energy saving home improvements!
Ask your local state government what kind of energy efficiency tax deduction programs it may have in place that you may qualify for! Which office you talk to can vary by state. The Database for State Incentives for Renewables & Efficiency(DSIRE) has local state and city programs listings as well as a variety of local energy efficiency program and policy updates.
When you visit DSIRE’s website, you can browse incentives by state and look for rebates, deductions and other energy efficiency programs. The program list will tell you when these programs were created and more importantly, when they were last updated or renewed. The policies for these incentives, like whether they apply to post home purchase improvements or not, depend on the type of incentive, but many of them are applicable to post-purchase home upgrades.
Use your tax refund to buy a home
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1"Publication 936 - Main Content." Publications Online. 2016. Accessed September 06, 2017.https://www.irs.gov/publications/p936/ar02.html
2Kay Bell, "The Mortgage Points Tax Deduction," Bankrate.com, April 09, 2015, , accessed September 08, 2017, http://www.bankrate.com/finance/taxes/mortgage-points-tax-break-1.aspx.
3 "Is there a tax credit for solar panels?" ENERGY STAR, , accessed September 08, 2017, https://energystar.zendesk.com/hc/en-us/articles/216375477.
4 J.D. Stephen Fishman, "Deducting Medical Home Improvements," Www.nolo.com, accessed September 08, 2017, http://www.nolo.com/legal-encyclopedia/deducting-medical-home-improvements.html.
6 “Tax Deduction for Home Energy Audits and Energy Efficiency Improvements.” DSIRE. May 05, 2016. Accessed October 04, 2016.
7 “Income Tax Deduction for Energy Efficiency Upgrades.” DSIRE. December 18, 2015. Accessed October 04, 2016. http://programs.dsireusa.org/system/program/detail/1227
Article Courtesy of ClaytonHomes.com